Updated bill numbers as of June 18, 2026.
As readers of this blog know, we have been tracking restrictive covenant legislation across the country for years. The pace has not slowed: What was 101 bills in 34 states just weeks ago is already outdated. The count is now 109 bills – 18 of which have become law this year.
Erika Hahn and I have been tracking them every step along the way, and I am finally able to start providing updates so you can timely make any necessary adjustments to your practices and documents.
Today’s update: Virginia
Effective July 1, 2026, Virginia’s noncompete law will be amended in three ways:
- Termination Without Cause: Virginia will prohibit enforcement of noncompetes (and no-service agreements) against employees whose employment is terminated without cause unless the employer provides severance or other monetary compensation.
- Healthcare Professionals: Virginia will prohibit noncompetes for most health care professionals.
- Franchise Restrictions: Virginia has amended its franchise law to ban certain post-franchise noncompetes and related restrictions.
These updates mark the latest steps in Virginia’s steady tightening of restrictive covenants over the last few years:
2020 Low-Wage Worker Ban: Virginia updated its noncompete law (Va. Code § 40.1-28.7:8) to ban noncompetes for low-wage workers1 and to require employers to post physical notices about the noncompete law.
2025 FLSA Expansion: Virginia expanded the scope of the low-wage worker exemption to include non-exempt workers under the Fair Labor Standards Act (FLSA), regardless of their actual earnings.
2026 The Triple Amendment: Virginia has now added three new restrictions (passed via five separate bills), each of which takes effect on July 1, 2026.
The “Terminated Without Cause” Amendment
The most significant of the developments is the new law concerning employees whose employment was terminated without cause. The new law provides as follows:
No covenant not to compete between an employer and an employee is enforceable if such employer discharges such employee from employment without providing severance benefits or other monetary payment to such employee, unless such employer discharges such employee for cause. Such severance benefits or other monetary payment shall be disclosed upon execution of the covenant not to compete.
In short, if a company terminates someone’s employment without cause and wants to enforce a noncompete, the employer must provide the employee with monetary compensation.
But, as is often the case with legislation, the devil is in the details . . . .
The devil…
First – and most significantly — the new law applies to all Virginia employees. Unlike the prior law, it is not limited to low-wage or non-exempt workers. There is no exemption for executives, high earners, or commission-based sales staff. Indeed, the practical effect may be felt most acutely at the executive level, where employers are most likely to need to preserve restrictions, but face vague financial requirements to doing so. And those requirements are likely not satisfied through compensation for the noncompete that would have been paid during employment, whether by promotions, salary increases, stock awards, option grants, bonuses, or other compensation).
Second, the amendment does not change the vague and potentially broad scope of covenants covered by the statute. It still covers any agreement “that restrains, prohibits, or otherwise restricts an individual’s ability, following the termination of the individual’s employment, to compete . . . .” While nondisclosure agreements and customer no-service agreements are expressly carved out, the statute is vague enough to apply to standard nonsolicitation agreements and other restrictive covenants. What other restrictive covenants are also covered (forfeiture for competition provisions, for example) still remains to be seen.
Third, while the new law expressly prohibits enforcement of noncompetes that don’t comply with the statute, existing statutory language can be read to broaden that prohibition even to entering into noncompetes that fail to comply with the new requirement. If so, an employer could face liability not merely for attempting to enforce a noncompliant agreement, but simply for entering into one.
Fourth, the new law provides zero guidance on what constitutes “cause,” much less on the form, amount, or duration of the payment. For example, will continuing employer-paid health insurance suffice? Or does “other monetary payment” mandate literal cash? Relatedly, does the agreement have to specify the amount of the payment, or is disclosure of the fact of a payment sufficient?
Fifth, the payment must be disclosed at the time the noncompete is executed. So, unless a new noncompete is agreed upon as part of the separation agreement, any noncompete that will be enforced in the event of a not-for-cause termination must identify the payment (or the fact of the payment) well before anyone knows the economic realities of the future termination.
The stakes of getting it wrong: Remember that there are civil penalties of $10,000 per violation (paid to the state) and a prevailing employee in a lawsuit is entitled to legal fees and costs.
The Healthcare Amendment
Virginia also enacted a separate law (via bills SB128ER and HB627ER) prohibiting noncompetes for healthcare professionals “licensed, registered, or certified by the Board of Medicine, Nursing, Counseling, Optometry, Psychology, or Social Work.”
While the new law drastically expands the low-wage worker noncompete ban across the medical field, the legislature did include explicit additional exemptions for:
- Noncompetes tied to the sale of a business.
- Training repayment agreements and recruitment costs repayment agreements provided the “health care professional . . . has been employed for fewer than five years.”
- Nonsolicitation covenants for existing and prospective “customers, with whom the employee had material contact during his employment, for purposes of providing products or services that are the same or substantially similar to those provided by the employer, except for any notice or communication as required by state or federal law,” provided that they do “not preclude a health care professional from disclosing the following information to a patient to whom the health care professional was providing consultation or treatment before departure from an employer: the health care professional’s continuing practice of medicine, the health care professional’s new contact information, and the patient’s right to choose a health care professional.”
Why do the exemptions matter? The healthcare amendment is noteworthy not only for what it prohibits, but also for what it expressly permits. In addition to exempting sale-of-business noncompetes, the statute specifically exempts certain training-repayment provisions and customer nonsolicitation covenants. If these provisions were already outside the scope of Virginia’s definition of a “covenant not to compete,” the legislature would not have needed to explicitly carve them out here. The inclusion of these exceptions suggests a legislative acknowledgment that, without them, these clauses might be treated as illegal noncompetes.
That issue has taken on increased significance following the Court of Appeals’ decision in Sentry Force Security LLC v. Barrera (discussed below). How expansively the statute will be interpreted remains to be seen.
The franchise amendment
Effective July 1, 2026, Virginia amended its franchise law (through HB069 and SB240) to prohibit franchisors from placing post-termination restrictions on a franchisee’s ability to continue offering, selling, or distributing goods or services, except that a franchisee can still be subject to these restrictions if they arise in connection with selling the franchise back to the franchisor or to a third party.
I am not a franchise lawyer, so I will leave the deep dive to others, as the amendment may (or may not) prove significant for franchise systems operating in Virginia.
Bonus: Virginia Court of Appeals expands the scope of the noncompete statute…
The legislative developments come right on the heels of a recent Virginia Court of Appeals unpublished decision in Sentry Force Security LLC v. Barrera, permitting a worker to challenge a no-recruit provision under Virginia’s low-wage worker noncompete statute.
While I don’t agree with the court’s expansive reading of the definition, it signals a major potential problem for employers using restrictive covenants in Virginia: If Virginia courts are willing to read the statute far more broadly than many employers anticipated, the new post-employment payment requirement may apply to all sorts of agreements, not just noncompetes.
Takeaways
As Virginia continues to move steadily toward greater regulation of restrictive covenants rather than outright prohibition, employers should not assume that only traditional noncompetes are affected. Accordingly, the safest course is to review all restrictive covenants for compliance with the new (and existing) law. That includes the following:
- noncompetes;
- nonsolicitation covenants;
- no-service provisions;
- no-recruit agreements; and
- other restrictions that could arguably fall within Virginia’s broad statutory definition.
If enforcement is a possibility following a termination without cause, the agreement should provide for – and clearly disclose – monetary compensation.
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*A huge thank you to Erika Hahn for all of her extraordinary help in tracking and monitoring all of the recent noncompete and trade secret legislative and caselaw developments.
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[1] The law defined low-wage workers as follows:
“Low-wage employee” means an employee whose average weekly earnings, calculated by dividing the employee’s earnings during the period of 52 weeks immediately preceding the date of termination of employment by 52, or if an employee worked fewer than 52 weeks, by the number of weeks that the employee was actually paid during the 52-week period, are less than the average weekly wage of the Commonwealth as determined pursuant to subsection B of § 65.2-500 or (ii) 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. “Low-wage employee” includes interns, students, apprentices, or trainees employed, with or without pay, at a trade or occupation in order to gain work or educational experience. “Low-wage employee” also includes an individual who has independently contracted with another person to perform services independent of an employment relationship and who is compensated for such services by such person at an hourly rate that is less than the median hourly wage for the Commonwealth for all occupations as reported, for the preceding year, by the Bureau of Labor Statistics of the U.S. Department of Labor. For the purposes of this section, “low-wage employee” shall not include any employee whose earnings are derived, in whole or in predominant part, from sales commissions, incentives, or bonuses paid to the employee by the employer.