February 20, 2024
Since 2020, Virginia has prohibited employers from imposing non-competes on “low-wage” employees. The definition of a low-wage employee is subject to change based on the annual determination of the “average weekly wage of the Commonwealth.” Va. Code § 40.1-28.7:8(A). On January 16, 2024, the Virginia Department of Labor and Industry (“DOLI”) announced the average weekly wage would increase to $1,410 per week in 2024. Thus, this year a low-wage employee is an individual who makes less than $1,410 per week (or $73,320 annually).
VIRGINIA’S PROHIBITION ON NON-COMPETES
In 2020, the Virginia legislature passed a law prohibiting non-competes with respect to low-wage employees. Under the terms of this state law, an employer cannot enter into, enforce, or threaten to enforce a covenant not to compete with any low-wage employee. Va. Code § 40.1-28.7:8(B). Virginia employers are not only prevented from entering into new covenants not to compete with low-wage workers, but also from enforcing or threatening to enforce covenants not to compete that were entered into before this law went into effect.
Virginia defines a “covenant not to compete” as:
a covenant or agreement, including a provision of a contract of employment, between an employer and employee that restrains, prohibits, or otherwise restricts an individual’s ability, following the termination of the individual’s employment, to compete with his former employer. A “covenant not to compete” shall not restrict an employee from providing a service to a customer or client of the employer if the employee does not initiate contact with or solicit the customer or client.
A “low-wage employee” is defined in terms of the “average weekly wage of the Commonwealth.” Va. Code § 40.1-28.7:8(A). The average weekly wage of the Commonwealth is computed annually by the DOLI. In 2023, a “low-wage employee” was an individual who made $1,343 per week or $69,836 annually. In 2024, this increased to $1,410 per week. Thus, in 2024, an employer cannot enter into (or enforce or threaten to enforce previously entered into) covenants not to compete with employees who make less than $1,410 per week or $73,320 annually.
Notably, Virginia does not prevent employers from utilizing nondisclosure agreements that are “intended to prohibit the taking, misappropriating, threating to misappropriate, or sharing of certain information, including trade secrets . . . and proprietary or confidential information.” Va. Code § 40.1-28.7:8(C). Employers should carefully evaluate the protection needed when developing and enforcing confidentiality, nondisclosure, and other agreements with employees.
CONCLUSION
Under this increased threshold for low-wage employees, employees who were not previously covered by Virginia’s prohibition on non-competes for low-wage employees may now be covered by the statute and released from any non-competition agreement. We recommend that employers review their agreements that include any form of restrictive covenant and ensure that no low-wage employees are subject to an improper restriction. While employers may not impose non-competes against low-wage employees, they may, where necessary, utilize non-disclosure agreements to protect trade secrets and propriety or confidential information.
If you have any questions or need further guidance regarding Virginia’s prohibition on non-competes for low-wage employees or restrictive covenants generally, please contact a member of Hancock Daniel’s Labor & Employment team.
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The information contained in this advisory is for general educational purposes only. It is presented with the understanding that neither the author nor Hancock, Daniel & Johnson, P.C., is offering any legal or other professional services. Since the law in many areas is complex and can change rapidly, this information may not apply to a given factual situation and can become outdated. Individuals desiring legal advice should consult legal counsel for up-to-date and fact-specific advice. Under no circumstances will the author or Hancock, Daniel & Johnson, P.C. be liable for any direct, indirect, or consequential damages resulting from the use of this material.
