Last August, Sands Anderson reported that the Federal Trade Commission’s rule banning non-competes was probably dead. While many employers likely breathed a sigh of relief after a federal judge in Texas struck down the Federal Trade Commission’s ban on noncompete agreements, the FTC rule nonetheless reflected a growing trend by governments to restrict or outright prohibit the use of non-compete agreements by employers.
While there is still no nationwide ban on account of the court’s ruling in Texas, and while some non-competes are still enforceable in Virginia, since 2020, the Commonwealth has prohibited employers from entering into, enforcing, and threatening to enforce a covenant not to compete with a “low-wage employee” – a term defined by Virginia Code § 40.1-28.7:8.
Currently, a "low-wage employee" is defined in Virginia to mean an employee whose average weekly earnings are less than the average weekly wage of the Commonwealth calculated annually pursuant to Virginia Code § 65.2-500.B – part of the Virginia Workers' Compensation Act.
In 2025, Virginia’s average weekly earnings equate to an annual wage of $76,081.20.
As of July 1, 2025, the definition of “low-wage employee” will be expanded to include an employee “who, regardless of his average weekly earnings, is entitled to overtime compensation under the provisions of 29 U.S.C. § 207 for any hours worked in excess of 40 hours in any one workweek.” By adding the new citation to 29 U.S.C. § 207, which is part of the federal Fair Labor Standards Act, Virginia has chosen to add as a protected class of workers those employees who are deemed “non-exempt” under the FLSA’s classification system. This protection will apply regardless of whether or not an employee meets the average weekly wage threshold.
It is important to note that this expanded definition will only apply to new agreements and that the amended law will not “invalidate, alter, or otherwise affect any contracts, covenants, or agreements entered into or renewed prior to July 1, 2025.”
Employers are cautioned to review their existing restrictive covenant agreements to ensure that their new agreements (including any templates) are compliant with the expanded Virginia definition of “low wage employee.” Employee handbooks and other company policies should also be reviewed for compliance.
Because the General Assembly has essentially incorporated the FLSA classification of a non-exempt employee into Virginia law, employers should also take steps to ensure that they are correctly classifying their employees. Classification can be tricky and legal counsel should be sought when an employer has any doubt whether it is properly classifying employees.
