Virginia Employers Face New Limits on Noncompetes Beginning July 1, 2026

Virginia employers that use noncompete agreements should take a fresh look at them before July 1, 2026.

Under SB 170, signed by Governor Abigail Spanberger on April 13, 2026, a noncompete agreement entered into, amended, or renewed on or after July 1, 2026, may be unenforceable against an employee discharged without cause unless the employer provides severance benefits or other monetary payment and discloses that benefit when the employee signs the agreement. This change is part of Virginia’s broader trend of limiting post-employment restrictions on workers.

For employers, the message is straightforward. A noncompete is no longer just a hiring document. Whether it can be enforced now depends on what the employer promised at the start and what happened when the employment ended.

What the new law does

Virginia has already limited noncompetes for lower-wage employees and employees receiving overtime under federal law. SB 170 goes further by adding a new rule about termination.

Under the new law, a noncompete cannot be enforced if the employer discharges the employee without providing severance benefits or any monetary payment unless the employee was fired for cause. The law states that the severance benefits or other payment must be clearly stated when the noncompete is signed.

This is the main change. Even if a noncompete might be otherwise valid, the employer could lose the ability to enforce it if the employee is let go without cause and the agreement did not clearly state the required payment.

Why this matters

This change will likely lead many employers to rethink their use of noncompete agreements.

For years, many businesses treated restrictive covenants as just routine paperwork for managers, sales employees, or workers with customer connections. This practice was already under pressure after Virginia limited noncompetes for low-wage workers. SB 170 adds another layer. Employers must now think not only about which employees sign a noncompete but also if they can enforce that restriction when an employee leaves under conditions that trigger the new law.

In practical terms, this means employers should prepare for greater scrutiny, more precise drafting, and a stronger focus on narrower options such as confidentiality agreements, trade secret protections, and nonsolicitation provisions.

The risks of noncompliance are significant. Employees have the right to file a civil lawsuit if they believe a noncompete breaks the new law. Courts can void the agreement and award remedies that include lost wages, damages, and attorney's fees. Additionally, the Virginia Department of Labor and Industry can impose civil penalties of $10,000 for each violation of the low-wage or severance rules. Employers may also be penalized for not posting the required notice of the law in the workplace.

What the law does not answer clearly

The new law creates a clear rule, but it leaves some important questions unanswered.

It does not define “for cause.” It does not establish a minimum severance amount or any required payment. It also does not explain how detailed the required disclosure must be, beyond stating that the severance benefits or other payment must be disclosed when the noncompete is signed.

These gaps are important. When a law leaves terms undefined, disputes often shift from whether a rule exists to what that rule means in practice. Employers who want to keep the option to enforce a noncompete should assume that vague language will create risk, not reduce it.

What has not changed

SB 170 does not ban all noncompetes.

It also does not remove other common protections. The law explicitly states that it does not limit nondisclosure agreements that prevent the taking, misuse, threatened misuse, or sharing of trade secrets and other confidential information. For many employers, these protections may provide more practical value and less litigation risk than a broad noncompete.

The act also mentions that it does not invalidate, alter, or otherwise affect any contract, covenant, or agreement made, changed, or renewed before July 1, 2026. This means the new rule is not retroactive in the usual sense. However, employers should exercise caution with agreements revised after that date, as amendments and renewals may activate the updated law.

What employers should do now

Employers should start by evaluating which positions truly need noncompete protection moving forward.

In many cases, the answer may be fewer than the business originally thought. If the main concern is protecting customer relationships, pricing, confidential information, or trade secrets, a more targeted agreement might be a better choice.

Employers should also review the agreements they currently use. Offer letters, employment agreements, compensation documents, and standalone restrictive covenant forms should all be checked for noncompete language. If the business plans to keep using noncompetes for certain employees, those agreements should be revised to meet the new severance or monetary payment requirement clearly.

Termination practices also deserve attention. Because enforceability now depends on whether a discharge was for cause, employers should ensure that their documentation, internal processes, and decision-making are consistent and well-managed.

Lastly, employers must meet compliance requirements. The law provides employees with a civil cause of action and allows for significant remedies, including attorney fees and costs. It also imposes civil penalties for violations and maintains the posting requirement for employers.

Conclusion

Virginia is continuing to restrict the enforcement of aggressive noncompete agreements.

SB 170 does not get rid of noncompetes, but it makes using them casually riskier and harder to enforce when an employee is terminated without cause. Employers still using old forms should review them before July 1, 2026. Often, a narrower and more thoughtful set of protections tailored to the specific role and business interest may be the smarter strategy.

Jeff Wilson is a Pender & Coward labor and employment attorney, who has advised public and private employers for more than twenty years, helping them navigate the legal, operational, and reputational risks that arise in managing today’s workforce.