Virginia recently joined a growing list of states that have passed legislation prohibiting employers from enforcing non-compete agreements against low-wage employees. Illinois, Maine, Maryland, Massachusetts, New Hampshire, Rhode Island, and Washington have already enacted similar legislation. And as we previously posted, similar legislation was introduced in the United States Senate nearly a year ago, though it did not advance. The trend reflects recognition among policy makers that non-compete agreements may unfairly restrict low-wage workers, who generally have limited bargaining power with respect to employers, from seeking new employment opportunities.
Virginia’s statute, Va. Code § 40.1-28.7:8(B), defines “low-wage employee” based on both income and the nature of an employee’s work. Employees who earn less than the weekly average wage in Virginia, based on the employee’s average weekly earnings in the 52 weeks preceding their termination, as well as independent contractors who earn less than the median hourly wage for all occupations in Virginia, are covered by the new statute. In addition, interns, students, apprentices, and trainees employed to “gain work or educational experience” are covered, whether or not they are paid.
Low-wage employees faced with enforcement of a non-compete agreement have two years to bring a civil action against their employer. The two-year statute of limitations begins counting from the date employees realize they signed a non-compete agreement, the date they were terminated, or the date an employer attempts to enforce the agreement, whichever is later. Employers found in violation of the statute may face civil penalties of $10,000.
Notably, the statute leaves in place an employer’s right to enforce non-disclosure agreements prohibiting trade secret misappropriation. But even with this exception, companies should revisit their approach to protecting trade secrets and other valuable business information.