Virginia employers who rely on non-compete agreements to protect legitimate business interests will soon face significant new constraints. Under Senate Bill 170, which amends § 40.1-28.7:8, non-compete agreements will be unenforceable against employees discharged without cause unless the employer provides severance or another form of monetary payment. Critically, that payment obligation must be disclosed to the employee at the time the agreement is executed. The changes take effect July 1, 2026, and represent a meaningful shift in how restrictive covenants may be drafted, presented, and enforced in the Commonwealth.
The scope of the new requirements is narrow but important. They apply only to non-compete agreements entered into, amended, or renewed on or after July 1, 2026. Agreements executed before that date remain governed by prior law. This effective-date structure gives Virginia employers a brief but valuable window to audit existing template agreements, evaluate onboarding and promotion workflows that trigger new or renewed covenants, and determine whether the business is prepared to offer disclosed severance in exchange for post-employment restrictions. Employers who choose not to provide severance should understand that they are effectively choosing to accept non-enforceability if a covered employee is later terminated without cause.
The stakes for non-compliance are substantial. Employers who violate the statute face civil penalties of $10,000 per violation, and affected employees may recover attorneys' fees. Given that violations can multiply across a workforce, this framework transforms non-compete drafting from a routine template exercise into a meaningful risk-management priority. Human resources, in-house counsel, and executive leadership should coordinate to review restrictive covenant programs well in advance of the July 1, 2026 effective date.
Practical steps include revising template non-compete agreements to include clear disclosure of any severance or monetary consideration tied to enforceability, updating offer letters and onboarding materials, and training managers involved in separations to properly document whether a termination is for cause. Employers should also consider whether narrower alternatives, such as non-solicitation or confidentiality provisions, may achieve their objectives with less exposure.
This article is intended for general informational purposes only and does not constitute legal advice. Employers should consult qualified counsel for guidance tailored to their specific circumstances.