Effective July 1, 2025, Virginia business owners must comply with a new law that expands restrictions on non-compete agreements. Previously, Virginia banned including, enforcing, or threatening to enforce non-compete clauses for “low-wage employees,” defined as an employee making less than $1,463.10 per week, or $76,081.20 per year in 2025 (VA DOLI). This meant that if an employee made more than that amount, the employer could legally include a non-compete in their contract, even if the employee was eligible for overtime pay.
Expanded Definition of “Low-Wage Employee”:
However, Senate Bill 1218 broadened the definition of who qualifies as a “low-wage employee” under Va. Code § 40.1-28.7:8(A). Now, even if an employee earns more than the average weekly wage in Virginia, they are still considered “low-wage” if they are entitled to overtime pay under the Fair Labor Standards Act (FLSA), §207.
In other words, if your employee is eligible for overtime pay, you cannot include, enforce, or even threaten to enforce a non-compete agreement, no matter how much they earn. Employers found in violation can face a civil penalty of $10,000 per violation. That penalty applies whether the clause is ever enforced in court.
Who is Entitled to Overtime Pay:
While the laws surrounding overtime pay are complex, generally, most employees who work more than 40 hours in a week must receive overtime pay at 1.5 times their regular rate. These non-exempt employees are protected under the FLSA and the Virginia Overtime Wage Act. Being paid a salary, as opposed to an hourly wage, does not automatically make someone exempt from overtime.
The most frequently used FLSA exemptions, often called the “white-collar” exemptions, apply to employees in bona fide executive, administrative, professional, outside sales, and certain computer employee roles. To qualify, the employee must:
- Be paid on a salary basis (or at a qualifying hourly rate for computer employees),
- Earn at least the minimum salary threshold set by the U.S. Department of Labor, and
- Perform primary job duties that meet the legal definitions for one of these exempt categories.
Other exemptions are common in specific industries, such as:
- Motor carrier exemption (drivers, mechanics, and loaders under U.S. DOT jurisdiction)
- Local delivery driver exemption (meeting certain pay-plan criteria)
- Certain agricultural and seasonal recreational employees
If an employee does not clearly meet one of these exemptions, they are non-exempt, and in Virginia, that means they count as a “low-wage employee” under the new non-compete law, even if they earn well above the old salary threshold.
Notice Requirements:
Employers must display a notice outlining the prohibition on non-compete agreements for “low-wage” employees, which must either include the full text of Virginia Code § 40.1-28.7:8 or an approved summary provided by the Virginia Department of Labor and Industry (DOLI). However, Virginia’s non-compete law does not require employers to give individual notice to employees that existing non-compete clauses will no longer be enforced. Instead, compliance is met through a general posted notice, placed in a conspicuous location alongside other mandatory federal and state employment law postings.
What this Means in Practice:
Consider this example: A digital media agency hired an account coordinator earning $58,000 per year and this employee was entitled to overtime pay under the FLSA. The employer required the employee to sign a 12-month non-compete agreement (a provision in their standard employment agreement), preventing the employee from joining or working with a competing agency located within 25 miles for one year after leaving the company.
Previously, this was allowed because the employee’s earnings were above the state’s “low-wage” cutoff. However, under the new law, the employer cannot include, enforce, or even threaten to enforce the non-compete agreement. If they do, they could be subject to a civil penalty of $10,000 per violation.
If your business still uses standard employment contracts that contain non-compete language, you may be violating the law without knowing it. Now is the time to carefully review your employment agreements and ensure that any non-compete provisions are only applied to employees who are exempt from overtime requirements. If you’re unsure whether your current contracts comply with the new law or if you need help making changes, consulting with an attorney is a smart next step. At Dunlap Law, we help Virginia businesses stay compliant and avoid unnecessary legal risks. Reach out to us to review and update your employment agreements.
Best Practices for Employers Under the New Law:
- Review contracts: Work with a Dunlap Law business attorney to review existing and future employment agreements to ensure compliance and protect your business interests.
- Post required notice: Ensure that you post a notice in the workplace advising of this new law.
- Consider alternative protections: Meet with a Dunlap Law business attorney to consider alternative protections like non-disclosure agreements, non-solicitation clauses, and confidentiality provisions, which may still be enforceable.
- Reassess job classifications: Ensure each position is properly classified as exempt or non-exempt under the Fair Labor Standards Act.
- Train your team: Educate HR staff and managers on the new law so they fully understand what is no longer permitted.
Noncompliance with Virginia’s updated non-compete law comes with steep penalties for businesses. Hire a Dunlap Law business attorney to review and update your employment agreements to remove prohibited language and add alternative protections.
This material is for informational purposes only. It is not intended as legal advice and does not create an attorney-client relationship between its readers and Dunlap Law. Consult an attorney before taking action on issues outlined here. This is attorney ADVERTISING MATERIAL.