Hunton Employment & Labor Perspectives

On April 13, 2026, Governor Abigail Spanberger signed two bills further restricting Virginia employers from entering into non‑compete agreements.  Both bills go into effect on July 1, 2026.  A third bill was returned to the House of Delegates with minimal changes from the Governor.

Virginia’s efforts to restrict non‑competition agreements began in 2020, when lawmakers enacted Section 40.1‑28.7:8, prohibiting employers from entering into non‑compete agreements with “low‑wage” employees—defined in 2026 as those earning less than $1,507.01 per week.  Those restrictions were soon expanded.  In 2025, lawmakers amended Code Section 40.1‑28.7:8 to prohibit employers from entering into non‑compete agreements with non‑exempt employees.

The most significant change this legislative session is Senate Bill 170 (SB170), which again amends Section 40.1‑28.7:8.  Under SB170, if an employee with a non‑compete is fired “without cause,” then the non‑compete is unenforceable unless the employer provides “severance benefits or other monetary payment,” which must be “disclosed upon execution” of the agreement.  The law does not define “cause,” “severance benefits,” or “other monetary payment.”  Nor does the law mandate that the required monetary payment fully compensate the employee for the restricted period.  The law affects only non‑competes entered into or amended on or after July 1, 2026. 

The second bill, Senate Bill 240 (SB240), amends two different statutes, Sections 13.1‑559 and 13.1‑563.  Although this amendment similarly prohibits non‑compete agreements, these restrictions apply to retail franchising and are housed within that portion of the Virginia Code.  Under SB240, franchisors may no longer enter into blanket non‑compete agreements with franchisees.  However, the amendment provides one exception—if the franchisee sells the franchise “at a mutually agreed upon price,” the sale may include a non‑compete clause for no more than two years.

While the third legislation, House Bill 627 (HB627), remains pending, the Governor’s recommended changes are minimal, and the bill seems likely to pass.  This bill amends Code Section  40.1‑28.7:8 to ban employers from entering into non‑compete agreements with “health care professionals,” defined as “any person licensed, registered, or certified by the Board of Medicine, Nursing, Counseling, Optometry, Psychology, or Social Work.”  The bill, however, provides several carveouts.  First, it allows health care professionals to execute restrictive covenants in conjunction with the sale of a business.  Second, it permits employers to seek repayment of “recruitment‑related costs, including relocation expenses, signing or retention bonuses . . . as well as recruiting, education, or training expenses” when the departing individual has been employed for fewer than five years.  Third, it permits employers to use “narrowly construed” client non‑solicitation agreements with health care professionals.

The Governor recommended two changes to HB627.  First, she recommended adding a provision making it clear that departing health care professionals may: disclose to their patients that they are continuing their practice elsewhere; inform their patients of the right to choose their health care professional; and provide the contact information for their new practice.  Second, the Governor recommended striking language to make it clear that Section 40.1‑28.7:8 does not apply to any existing non‑compete agreements that were merely “renewed” after July 1, 2026.  

These bills reflect the Commonwealth’s growing skepticism of non‑compete agreements. With SB170 and SB240 set to take effect on July 1, 2026, and HB627 likely to follow, companies are advised to review their restrictive covenants to ensure compliance with these new laws.