In previous blogs we have discussed several aspects of the 2020 Virginia statute (§ 40.1-28.7:8. Covenants not to compete prohibited as to low-wage employees; civil penalty (virginia.gov)) that restricts the use of noncompete agreements. We are learning that the statute is surprisingly nuanced.
As an additional reminder, the law provides that as of July 1, 2020, employers are prohibited from entering into, enforcing, or threatening to enforce a covenant not to compete with any “low-wage employee.” The law defines “low-wage employee” as one whose average weekly earnings are less than the average weekly wage of the Commonwealth, as determined annually by the Virginia Workers’ Compensation Commission. For 2022, that amount has been increased to $1,290 per week, as shown on the Virginia Department of Labor’s website at https://www.doli.virginia.gov/2022/01/01/notice-of-the-average-weekly-wage-for-2022/. On an annualized basis, the compensation would be $67,080. There is also a separate provision that applies to independent contractors.
Although the restrictions on the use of noncompete agreements do not apply to those in place prior to July 1, 2020, employers should note one additional restriction on any agreements entered into after that date. For the higher-wage or commission-based employees, the statute provides that an agreement “shall not restrict an employee from providing a service to a customer or client of the employer if the employee does not initiate contact with or solicit the customer or client.”
The statute also contains a little-noticed provision that allows the use of confidentiality agreements even if a noncompete agreement is barred: “Nothing in this section shall serve to limit the creation or application of nondisclosure agreements intended to prohibit the taking, misappropriating, threating to misappropriate, or sharing of certain information, including trade secrets, as defined in § 59.1-336, and proprietary or confidential information.”
Employers must post either a copy of the new law or a summary approved by the Virginia Department of Labor and Industry where other state and federal laws are required to be posted. A notice on the DOLI website which can be used as the poster also contains the average weekly wage information is found at the same link noted above: https://www.doli.virginia.gov/2022/01/01/notice-of-the-average-weekly-wage-for-2022/.
John Falcone and Luke Malloy handle employment law matters at PLDR Law. Feel free to contact us if you have questions about this matter.