Are All Low-Wage Non-Competes Illegal in Virginia? Maybe not.
The 2020 legislative session brought sweeping changes to Virginia’s employment laws by banning non-compete agreements for low-wage workers. Yet a closer look at the changes reveals a huge lack of consensus as to what effect the law actually had. More specifically: Did all low-wage non-competes become illegal? Or did just new low-wage non-competes become illegal?
This seems like a simple question, yet a review of the data shows widespread disagreement among the Virginia legal community regarding whether non-competes predating the 2020 law’s implementation date can be legally enforced. Our team performed a close review of various blog posts and press releases from prominent Virginia law firms regarding the low-wage non-compete ban. The result? Of the 12 press releases and articles located on the subject, seven firms stated or implied that the law banned enforcement of all non-competes, new or old. But the other five firms opined that only new non-competes were banned.
So, what does the law itself have to say about this? A review of the applicable code section (Va. Code § 40.1-28.7:8) would lead the reader to believe that the seven firms in the “total ban” group are correct. Nothing in the codified statute indicates existing or old low-wage non-competition agreements are not included in the scope of the ban. It seems this should be the end of the inquiry, right?
Not so fast.
In Virginia, as elsewhere, the codification of a statute is a mere statement of the law–technically, the code section is not the actual law. What is the actual law? Simply put, the actual law is the “session bill” passed by the general assembly. After approval and the governor’s signature, the session bill is forwarded to the codification committee. There, the committee usually copies and pastes the entire contents of the bill into the applicable code section. Theoretically, the committee makes no substantive changes while codifying the session bill.
And to be fair, this is exactly what the committee did. After the normal preface of “Be it enacted . . .”, the session bill listed under heading number one, “That the Code of Virginia is amended by adding . . . as follows.” And what followed was the exact content of what appears in the code.
What happened next has roiled the Virginia business law community into confusion. After the text the assembly added to the code, they included an additional main heading in the session bill–one that was not mandated to be added to the code:
“[T]he provisions of this act shall be applicable to covenants not to compete that are entered into on or after July 1, 2020.”
Because this heading was not prefaced with the phrase “the Code of Virginia is amended by adding,” the codification committee did not add the final sentence into the code. For this reason, many in the Virginian legal community have advised clients not to enforce old non-competition agreements. In fact, businesses may, within the other constraints of such agreements found in a bevy of applicable law, otherwise enforce low-wage non-competition agreements under Va. Code § 40.1-28.7:8 that were entered into prior to July 1, 2020.