Virginia has enacted sweeping new limitations on non-compete agreements effective July 1, 2026. While Virginia has prohibited non-compete agreements for low-wage employees since 2020, the new laws will expand restrictions on non-competes beyond low-wage employees to cover all employees, including health care professionals.
First, Senate Bill 170 (“SB 170”) requires employers to provide severance as a condition of enforcing non-compete agreements. Second, House Bill 627 (“HB 627”) bans non-compete agreements with health care professionals entirely.
Neither SB 170 nor HB 627 invalidate existing non-compete agreements. The laws apply to agreements entered into on or after July 1, 2026.
New Severance Requirement for All Non-Competes
SB 170 renders non-competes unenforceable if an employer terminates an employee without providing severance “or other monetary payment.” The employer must also disclose the severance terms to the employee at the time the non-compete agreement is provided to the employee. Employers are not required to provide severance where an employee is terminated for cause, but SB 170 does not define “cause,” nor does it establish a minimum severance payment.
Ban on Non-Competes With Health Care Professionals
HB 627 prohibits employers from entering non-competes with “health care professionals,” expanding existing laws prohibiting non-compete agreements with low-wage employees as defined in Va. Code § 40.1-28.7:8. HB 627 defines a “health care professional” as “any person licensed, registered, or certified by the Board of Medicine, Nursing, Counseling, Optometry, Psychology, or Social Work.” This would seemingly encompass medical doctors, registered nurses, therapists, social workers and other professions.
While HB 627 generally prohibits non-competes with health care professionals, the law does not apply to non-competes entered into in connection with the sale of a business. Nor does the law apply to certain “customer” non-solicitation agreements with health care professionals, namely, those agreements that restrict health care professionals from soliciting customers or prospective customers with whom the health care professional had material contact during employment, for the purpose of providing products or services that are the same as or substantially similar to those provided by the employer.
Lastly, the law expressly permits the use of non-disclosure agreements that restrict the misuse of trade secrets and proprietary or confidential information, including with respect to health care professionals.
While HB 627 prohibits non-competes with health care professionals, it expressly permits employers of health care professionals to include provisions in employment agreements requiring repayment for recruitment-related costs from a departing health care professional employed for fewer than five years, including education, training, or relocation expenses, signing or retention bonuses, and other incentives provided to an employee to encourage relocation or to establish an employer’s practice in a specific geographic area.
Penalties for Non-Compliance
The laws impose costly penalties for non-compliance. If a court or arbitrator determines that an employer has violated either SB 170 or HB 627, a civil penalty of $10,000 for each violation is imposed. The employee is also entitled to reasonable costs, expert witness fees, and attorney’s fees.
Posting Obligation
Every employer must post a copy of the laws or a State-approved summary in the same location where the employer posts other legally required employee notices. Failure to comply with posting obligations can result in penalties, including written warnings and fines up to $1,000 per violation.
Key Takeaways for Employers
Employers should ensure they afford severance in connection with a post-employment non-compete and that the severance terms are embedded in the agreement at the time the employee signs it. Employers should also be sure to update the required employee notice postings relating to non-competes. Lastly, employers must be mindful not to impose non-competes on health care professionals, as defined under the new law.