Virginia has further restricted noncompete agreements. Effective July 1, 2025, Virginia Code § 40.1-28.7:8 will prohibit Virginia employers from entering into non-competition agreements with employees who are classified as non-exempt under the Fair Labor Standards Act (FLSA). The FLSA is the federal law that governs how employees are paid. Nonexempt employees are those who are subject to minimum wage and overtime provisions of the FLSA. The updated law will not affect employees who meet the requirements for an exemption as set forth by the FLSA, for example, employees who meet with executive, professional, and administrative salary basis and duties.
As a reminder, Virginia Code § 40.1-28.7:8 already bars covenants not to compete with “low-wage employees.” A low-wage employee is one whose average weekly earnings are less than the annually adjusted threshold—projected to be $1,463.10 per week (approximately $76,081 per year) in 2025. This amendment adds nonexempt employees to the definition of low-wage employees.
The 2024 amendments preserve all existing carve-outs, including the exception for employees whose earnings are “predominantly” derived from commissions, incentives, or bonuses. Confidentiality agreements and narrowly tailored customer non-solicitation provisions that do not operate as de facto non-competes remain permissible.
To remain in compliance, Virginia employers should:
- Audit employee classifications under the FLSA.
- Review existing restrictive covenant agreements.
- Change any policies or practices that would attempt to enforce a noncompete against a low-wage employee, and
- Change any policies or practices that would require low-wage employees to execute non-compete agreements as a condition of employment.
