Non-competition agreements are important to professional relationships. For employers, they can serve as an important tool for protecting an organization’s place in the market. A well-written non-competition agreement can also provide context and a path forward for employees planning their next career move.
Nonetheless, for the past several years, non-competes have been on the chopping block at the federal and state level. I’ve previously written about Virginia banning non-competes for non-exempt and low-wage workers, as well as the 2026 additions to the non-compete law (effective July 1, 2026) and its interplay with severance payments. I’ve since received various questions on the nuances associated with the new law.
There is still ample time to understand and implement effective strategies to address the new law change and other workplace policies in 2027. The following are frequently asked questions paired with answers and suggestions for year-end planning for 2027.
1. What changes were made as part of the 2026 non-compete amendment?
Virginia’s update bans non-competes for healthcare professionals, while also requiring severance payment for terminations without cause if an employer plans to enforce a restriction post-termination. The amount of severance must be identified at the time a non-compete is signed.
I recommend that employers audit their existing non-competition agreements to review whether an amendment is necessary in order to make them enforceable (i.e., severance at the time an agreement is signed) while also clarifying an approach for new team members. I recommend that employers perform the audit/amendments as soon as possible to protect their interests.
2. What defines “cause” under the new non-compete law?
Cause is undefined in the 2026 statutory update. Therefore, a contract’s definition of “cause” is likely a clear starting point in any legal analysis. I recommend that employers identify what constitutes cause in their agreements and policies and plan accordingly. A failure to do so could result in a court determining that a termination was without cause (potentially creating more liability for employers).
3. How much severance is sufficient to satisfy the new non-compete law?
The 2026 statutory amendment does not define the amount of severance payment necessary. Nonetheless, severance should be clearly distinguishable from funds not otherwise earned (or potentially earned, when considering the issue of commissions or bonuses). I recommend that employers consider the amount of severance that would be considered reasonable based on an employee’s compensation, as well as the importance of the restriction overall to business operations. A small amount of severance (i.e., only a few hundred dollars) could be considered bad faith and unreasonable, potentially increasing liability.
Theodora Stringham focuses her practice on bringing solutions-oriented representation and zealous advocacy to complex issues impacting individuals, organizations, and businesses. Ms. Stringham seeks to understand clients’ concerns and provide thorough and strategic options aimed at achieving their goals. She has been recognized for her work in the Real Estate, Labor and Employment, and Commercial Litigation practice areas, providing counseling and litigation support for a wide variety of concerns.