Non-Competes No Longer Enforceable for Lower Income Workers
A landmark new law passed by the Virginia legislature will render many non-competition provisions unenforceable. House Bill 330 states that non-competition provisions can no longer be enforced against “low wage” employees.
The statute defines “low wage” as less than the average weekly wage of the Commonwealth. This is a significant change and an amount much greater than other similar states. The average weekly wage of the Commonwealth changes from year to year. The Virginia Workers’ Compensation Commission sets the dollar amount. The amount of yearly income to qualify as a “low wage” employee is surprisingly high. For example, any employee who earned less than $59,000 in 2020 would qualify as “low wage.”
If an employer tries to enforce a non-compete provision against a low wage employee, the employee can then countersue. The law provides the possibility for an award of lost compensation, liquidated damages, expert witness fees, and even attorney’s fees.
The law also provides protection against non-solicitation provisions. While the new law is ostensibly titled as a non-competition statute, it nonetheless contains protections against non-solicitation provisions as well. A non-competition provision is a prohibition on an employee from competing in the same or similar line of work with his former employer after his employment ends. A non-solicitation provision is a prohibition on an employee soliciting the clients of his former employer after termination. Specifically, the new law states low wage employees cannot be found to be in violation of a non-solicitation provision if the employee does not initiate contact with his employer’s former client. In other words, there is no violation of a non-solicitation provision for a low wage employee if the client initiates first contact with the former employee.
A few caveats limit the applicability of the new law. First, the law applies only to employment agreements executed after July 1, 2020. Employment agreements in existence prior to that date are not affected. In other words, non-competition and non-solicitation provisions signed prior to July 1, 2020 are still in effect. Second, the law applies only to salaried employees. If the employee is solely or primarily compensated via commission or bonus, the law does not apply.
Despite these caveats, the new law banning non-competes for lower income employees is a significant step in the right direction. For too long, Virginia served as a haven for pro-business groups and employers. As we argued before on this website, being the #1 state for business suggests Virginia is near the bottom 50 states for employees. This new law is a small step in addressing this inequity.