Virginia's Senate Bill 170 took effect on July 1, 2026, significantly reshaping the landscape for non-compete agreements across the Commonwealth. Employers who rely on restrictive covenants to protect business interests must promptly reassess their existing agreements, severance structures, and industry-specific practices to remain compliant and avoid meaningful legal exposure.
Under the new law, non-compete agreements are no longer enforceable against employees discharged without cause unless the employer has provided pre-defined severance benefits that are expressly articulated within the agreement itself. This is a critical shift. Employers can no longer rely on informal severance practices or discretionary post-termination payments to preserve enforceability. To retain the ability to enforce a non-compete following an involuntary termination without cause, the severance package must be documented in the four corners of the agreement at the time of signing. General references to future negotiations or handbook-based severance policies will not satisfy the statutory requirement.
The legislation also introduces sweeping industry-specific limitations. Healthcare professionals are now broadly exempt from non-compete restrictions, with a narrow exception preserved only in connection with the sale of a business. Healthcare employers should immediately audit their employment templates, physician agreements, and clinician onboarding materials to remove or revise provisions that will no longer hold up in court. Separately, the law bans post-termination non-competes in franchise agreements, meaning franchisors and franchisees must revisit their standard forms and any existing arrangements that impose restraints on former franchisees or their personnel.
The stakes for noncompliance are substantial. Employers who attempt to enforce agreements that run afoul of SB 170, or who fail to update their practices, face civil penalties as well as private rights of action. Aggrieved individuals may pursue damages and recover attorney fees, creating a meaningful financial deterrent and a clear incentive for litigation. This combination of public enforcement and private remedies makes a prompt, comprehensive review of existing agreements essential rather than optional.
Employers should prioritize a full audit of restrictive covenants, severance provisions, and industry-specific templates in light of the new requirements.
This article is provided for general informational purposes only and does not constitute legal advice. Employers should consult qualified counsel for guidance tailored to their specific circumstances.