By Tom Whitfield

Virginia employers who terminate workers without cause and pay no severance cannot enforce a noncompete under SB170, signed by Governor Abigail Spanberger and effective July 1, 2026. The statute carries civil penalties of up to $10,000 per violation, as determined by the Commissioner of Labor and Industry, and it extends a protection that previously covered only low-wage employees to the entire workforce.

The rule is blunt: a restrictive covenant is unenforceable if the employer discharges the employee without cause and provided no severance benefits or other monetary payment. The severance commitment must also have been disclosed when the covenant was signed, not after the fact. Courts may void noncompliant agreements outright and award employees liquidated damages, lost compensation, and reasonable attorneys' fees.

Two exceptions survive. Enforcement remains available when the employee was terminated for cause or resigned voluntarily. The statute also bars retaliation against employees who file claims.

What does the new law change?

Before SB170, Virginia's noncompete restrictions applied only to low-wage employees. The new rule covers all employees, and it applies to restrictive covenants entered into, amended, or renewed on or after July 1, 2026. Agreements executed earlier are grandfathered and face no new requirements.

That grandfathering invites a question the statute does not answer: how regulators will treat amendments or renewals of pre-2026 agreements, which do fall under the new rule. Employers planning routine updates to older contracts may unintentionally bring them into scope. In plain words, any agreement touched after the effective date must comply.

What counts as severance?

Here the law is silent. The statute hinges on "severance benefits or other monetary payment," a phrase it never defines — not the amount, not the form, not the duration. Common practice treats severance as pay beyond earned wages, such as a lump sum, continued salary, or benefits continuation, but that practice is not the law.

The promise of easy compliance carries a caveat: until courts or the department clarify the threshold, employers cannot know whether a modest payment will suffice. Counsel should build a documented severance framework at the time the covenant is executed, not at termination.

What counts as cause?

"Cause" is the exception that saves a noncompete, yet the statute leaves it undefined too. In most employment contexts it means serious misconduct — dishonesty, willful policy violations, gross negligence, or criminal conduct — and existing contractual definitions will likely matter in disputes.

The practical takeaway is plain: agreements without a written definition of "cause" leave the severance question to a judge.

What should employers do now?

HR and legal teams face four concrete tasks before July 1, 2026:

• Build severance into covenants. Update standard restrictive covenant agreements to disclose the severance or monetary payment available on a without-cause termination. A noncompete is only as enforceable as the commitment behind it.
• Define "cause" in writing. Add a clear definition so there is no ambiguity about when the severance requirement is triggered.
• Post the required notice. Employers must display the statute or a department-approved summary alongside other employment notices; repeated failures can draw penalties of up to $1,000.
• Train HR and managers. Termination decisions must be handled in a way that preserves enforceability where the employer intends it.

Virginia joins a broader push against restrictive covenants, but this law is narrower than a ban — it prices enforcement rather than prohibiting it. The open questions on "severance" and "cause" mean the real test of SB170 will come in the first court decisions interpreting both terms after the law takes effect.

Mary Elizabeth "Betsy" Davis is an attorney with Whiteford, Taylor & Preston, L.L.P., in Richmond, Virginia.