Virginia has enacted SB 170, a significant reform that reshapes how employers may use non-compete agreements when parting ways with employees. Under the new law, a non-compete agreement is unenforceable against an employee who is discharged without cause unless the employer provides disclosed severance benefits or other monetary payment. For Virginia employers who have long relied on restrictive covenants to protect client relationships, trade secrets, and workforce investments, this change requires a careful reassessment of both agreement templates and separation practices.
The timing of the reform gives employers a defined, but narrow, planning window. SB 170 applies to non-compete agreements entered into, amended, or renewed on or after July 1, 2026. Agreements executed before that date remain governed by prior law, but any renewal, amendment, or new hire arrangement after the effective date will fall squarely within the new regime. Employers should therefore avoid inadvertently triggering the statute through routine updates, promotions, or refreshed onboarding paperwork that could be construed as amending existing covenants.
Practically, employers who wish to preserve enforceability of non-competes in without-cause separations will need to build a severance or monetary payment component into their restrictive covenant strategy and disclose it clearly. This calls for coordinated revisions to employment agreements, offer letters, separation templates, and internal termination protocols so that decision-makers understand when a covenant will hold and when it will not.
SB 170 also arrives alongside a separate categorical ban on non-competes for health care professionals in Virginia. Hospitals, physician groups, and other health care employers should not assume that a compliant severance structure will preserve enforceability against clinicians; instead, they should overhaul retention and restrictive covenant practices, considering alternatives such as tailored confidentiality provisions, non-solicitation clauses where permissible, and enhanced retention incentives.
Employers should use the runway before July 1, 2026 to audit existing templates, identify workforce segments most affected, and align legal, HR, and finance stakeholders on a revised approach that balances protection with compliance.
This article is provided for general informational purposes only and does not constitute legal advice. Clients facing specific restrictive covenant or separation issues in Virginia should seek tailored guidance from qualified counsel.