What Virginia Employers and Employees Should Know Before Relying on a Noncompete
Noncompetes tend to look strongest while everyone is still working together. The employer has a signed agreement in its files, and the employee may assume that changing jobs will trigger an immediate lawsuit. The real test comes later, when a resignation, layoff, or competing offer turns contract language into a business problem.
Virginia has narrowed when these restrictions can be used, and changes that took effect in 2026 place even more weight on how the agreement was written and how the employment ended. Before a company sends a demand or an employee walks away from a new opportunity, an experienced Leesburg business lawyer can help determine whether the clause still provides the protection both sides assume it does.
Pay Structure Can Decide Whether the Agreement Is Enforceable
A noncompete can fail before its duration, territory, or wording ever becomes an issue. Virginia bars businesses from using these restrictions against low-wage employees. That category includes workers who earn less than the Commonwealth’s average weekly wage and employees entitled to overtime pay, regardless of their total annual income.
Salary and title may provide an incomplete picture. A well-paid employee can still qualify because of overtime status. Employees whose earnings come wholly or predominantly from sales commissions, incentives, or bonuses fall outside the low-wage definition.
Payroll and classification records can settle the issue. They show whether the employee fell below the wage threshold, remained eligible for overtime, or earned predominantly through commissions. A restriction signed with a covered employee may have been barred from the start.
How a Layoff Changes Enforcement of a New Noncompete
Senate Bill 170, enacted as Chapter 883, amended Virginia Code § 40.1-28.7:8 for agreements entered into, amended, or renewed on or after July 1, 2026. A business that discharges an employee without cause cannot enforce the noncompete unless it provides severance benefits or another monetary payment disclosed when the covenant is signed.
Money offered after the employee accepts a competing position may come too late. The statute ties enforcement to compensation disclosed when the agreement is signed, leaving a later payment unable to supply the missing term retroactively.
Virginia law leaves “cause” undefined and sets no minimum severance amount for this provision. The reason recorded for the termination can decide whether the company retains an enforceable restriction. A layoff or reduction in force can create a different enforcement problem from a documented discharge for cause.
The amendment does not reach agreements entered into, amended, or renewed before July 1, 2026. A later amendment to an older contract can bring the restriction within the new rule.
Broader Language Can Weaken a Noncompete
A one-year term and a modest territory offer little protection when the clause bars every job with a competing company. The work covered by the restriction can create a larger problem than its duration or geographic reach.
In Home Paramount Pest Control Companies, Inc. v. Shaffer, the agreement prohibited the former employee from working for a competing pest-control business in virtually any capacity. The Supreme Court of Virginia rejected the clause because it also covered positions unrelated to the work the employee had performed.
A restriction tied to the employee’s actual accounts, market activity, or competitive responsibilities focuses on the risk created by the departure. Language that also bars unrelated accounting, administrative, or technical work can support a challenge to the entire clause.
Confidentiality and Customer Limits May Still Apply
A failed noncompete leaves other contract duties intact. Customer files, internal pricing, business plans, and proprietary records can remain protected under a valid nondisclosure agreement.
A new employer can create additional risk by encouraging a recent hire to bring information from the former company. The employee’s knowledge and experience can move with the person. Files, trade secrets, and confidential records remain with the business that owns them.
Virginia treats a customer who reaches out independently differently from one the former employee actively solicits. Serving the first may fall outside the restriction. Direct outreach can support a separate dispute under a properly written non-solicitation provision.
Calling a provision “confidentiality” or “non-solicitation” cannot shield an overbroad restriction. A clause can operate as a noncompete when its effect prevents the employee from continuing to work in the field.
The FTC Rule Is Gone, but Federal Scrutiny Continues
The Federal Trade Commission adopted a nationwide Non-Compete Clause Rule in 2024, but the rule never took effect. A federal court vacated it, and the FTC dismissed its appeals in September 2025. No blanket federal ban currently governs noncompetes.
The FTC has continued to pursue individual enforcement actions. In June 2026, the agency finalized an order requiring Rollins Inc. to stop enforcing noncompetes against more than 18,000 current and former employees. According to the FTC, the restrictions applied to nearly all employees even though their positions and responsibilities varied widely.
Widespread or indiscriminate use of noncompetes can still create federal antitrust risk even though the nationwide rule is gone. That federal concern remains separate from whether a particular agreement can be enforced under Virginia law.
Demand Letters Create Risk Before Litigation Begins
A demand letter sent to an employee or a new employer can delay a start date, place a promotion in doubt, or trigger an immediate fight over an injunction. The pressure begins well before anyone files a lawsuit.
Virginia permits a civil penalty of $10,000 for each violation involving a prohibited noncompete. An employee can also seek lost compensation, damages, attorney fees, and an order stopping enforcement.
A credible demand identifies the conduct prohibited by the clause and the business interest placed at risk. The signature on the contract offers little leverage when the former employer cannot connect the employee’s new work to a valid restriction.
Before a company sends a demand, or a new employer abandons a valuable hire, guidance from a knowledgeable Leesburg business lawyer can help separate an enforceable business protection from a restriction that reaches beyond Virginia law.
Contact Our Leesburg Business Lawyers About a Noncompete
If you are preparing an employment agreement, responding to an employee’s departure, evaluating a severance arrangement, or concerned that a noncompete could interfere with a new position, the restriction deserves careful review before it changes an important business decision.
At Simms Showers Law, our attorneys help businesses and employees address noncompete disputes before they derail a new opportunity or business transition. Speak with a trusted Leesburg business lawyer to learn how our team can help you understand the agreement, address the immediate business concerns, and determine the best path forward.
This memorandum is provided for general information purposes only and is not a substitute for legal advice particular to your situation. No recipients of this memo should act or refrain from acting solely on the basis of this memorandum without seeking professional legal counsel. Simms Showers Law expressly disclaims all liability relating to actions taken or not taken based solely on the content of this memorandum.
Sources:
- Code of Virginia § 40.1-28.7:8, Covenants Not to Compete Prohibited; Exceptions; Civil Penalty
law.lis.virginia.gov/vacode/title40.1/chapter3/section40.1-28.7%3A8/ - Virginia General Assembly, Senate Bill 170, Chapter 883
lis.virginia.gov/bill-details/20261/SB170/text/CHAP0883 - Supreme Court of Virginia, Home Paramount Pest Control Companies, Inc. v. Shaffer, Record No. 101837
vacourts.gov/opinions/opnscvwp/1101837.pdf - Federal Trade Commission, Federal Trade Commission Files to Accede to Vacatur of Non-Compete Clause Rule
ftc.gov/news-events/news/press-releases/2025/09/federal-trade-commission-files-accede-vacatur-non-compete-clause-rule - Federal Trade Commission, FTC Approves Final Consent Order in Pest-Control Noncompete Matter
ftc.gov/news-events/news/press-releases/2026/06/ftc-approves-final-consent-order-pest-control-noncompete-matter
