Virginia Governor Glenn Youngkin recently signed legislation expanding the state’s limitations on the use of noncompetition agreements in employment. Currently, Virginia prohibits employers from entering into noncompetes with "low-wage" employees. Low wage is defined by a salary level (approximately $76,000 annually for 2025) that is periodically adjusted for inflation.

The new law expands this prohibition to include any worker defined as non-exempt from overtime pay requirements under the Fair Labor Standards Act. The law takes effect July 1, 2025, and applies to any noncompete entered into after that date. It will not affect existing agreements, restrictions on customer or employee solicitation, or use of the employer’s confidential business information. The law applies to workers who fail to meet the duties tests for the FLSA exemptions regardless of their salary level.

Even in states without an express prohibition, employers should be cautious about using noncompetes with non-exempt workers. In most cases, these employees have little ability to materially compete with the company, and the noncompetes would be difficult to enforce. In some states, attorneys general and private parties have sued employers that require noncompetes with hourly workers, alleging that the agreements are actually an attempt to restrain trade. The Federal Trade Commission recently announced that it would be reviewing anti-competitive practices including the unreasonable use of noncompetition agreements.

In most cases, employers can adequately protect themselves from non-exempt workers' post-employment activities through use of confidential information agreements, and perhaps limited non-solicitation covenants. Attempts to directly preclude these employees from working for a competitor raise significant legal risks.

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