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April 15, 2026
Virginia lawmakers continue to narrow the circumstances under which employers may enforce post-employment non‑competition restrictions. Virginia employers may soon be required to pay severance to discharged employees if the employer wants to enforce a non-competition restriction.
A proposed new law (Senate Bill 170) would amend Virginia’s existing non-competition statute (Virginia Code § 40.1-28.7:8, which is applicable to low-wage earners [1]) to also prohibit enforcement of non-competition restrictions against all employees who are fired or laid off, unless the employer provides severance or other compensation to the discharged employee. Importantly, non-competition restrictions would remain enforceable, even without severance or compensation, where the employee was terminated for “cause.” The new law would apply to agreements that are signed on or after July 1, 2026.
SB 170 does not define the amount of severance/compensation that will constitute adequate consideration, but the terms must be disclosed to the employee at the time of signing the non-competition restriction. SB 170 also does not define “cause.” It appears that the sufficiency of the severance/compensation and the existence of legitimate “cause” will be issues for the courts to decide.
The bill also expands the remedies in Virginia Code § 40.1-28.7:8 to allow discharged employees to bring a civil action against any employer who attempts to enforce a non-competition restriction in violation of the law. A successful employee will be entitled to recover reasonable costs and attorney’s fees. Employers may also face civil penalties of $10,000 per violation.
SB 170 has already passed the Virginia House and Senate and is expected to be signed by the Governor.
Action Items for Employers
The new law would require employers to make strategic decisions weighing the value of prohibiting post-employment competition against the cost of providing severance to employees who are discharged without “cause.” Employers should consider taking the following actions:
The author of this article, Andrew M. DeLucia, is a member of the Bars of Pennsylvania and New Jersey. This article is designed to provide one perspective regarding recent legal developments, and is not intended to serve as legal advice in Pennsylvania, New Jersey, Virginia, or any other jurisdiction, nor does it establish an attorney-client relationship with any reader of the article where one does not exist. Always consult an attorney with specific legal issues.
[1] See our article here discussing how Virginia defines low-wage earners.
