Employee Non-Compete Agreement and Enforceability Memo — Virginia

VIRGINIA Employee Non-Compete Agreement and Enforceability Memo

Quick-Reference Summary

Part A — Enforceability Memo

MEMORANDUM

TO: [CLIENT NAME]
FROM: [ATTORNEY NAME], [EMPLOYMENT GROUP]
DATE: [__/__/____]
RE: Enforceability of Proposed Non-Compete Covenant — [EMPLOYEE NAME] — Virginia Law

I. Question Presented

Whether the proposed non-compete covenant between [EMPLOYER] and [EMPLOYEE], restricting [EMPLOYEE]'s post-termination ability to engage in [COMPETITIVE ACTIVITY] within [GEOGRAPHIC AREA] for [DURATION], would be enforceable under Va. Code § 40.1-28.7:8 and Virginia common law.

II. Short Answer

[☐ Likely enforceable] [☐ Likely unenforceable — employee falls within § 40.1-28.7:8 low-wage ban] [☐ Likely unenforceable — covenant fails Modern Environmental reasonableness test] [☐ Enforceability uncertain; recommend material revision]. Virginia STRICTLY construes non-competes against employers and will NOT blue-pencil. Any defect in scope, function, or duration risks total invalidation plus $10,000 statutory penalty and exposure to private suit.

III. Threshold Statutory Bar — § 40.1-28.7:8

A. Is the employee a "low-wage employee"?

Under Va. Code § 40.1-28.7:8 (as amended effective July 1, 2025), a "low-wage employee" is:

1. An employee whose average weekly earnings during the 52 weeks immediately preceding termination are below the Commonwealth's average weekly wage (2025: $1,463.10/week = $76,081.14/year — verify VEC notice for current year); OR
2. Regardless of earnings, any employee entitled to overtime compensation under 29 U.S.C. § 207 (i.e., any non-exempt FLSA employee); OR
3. Interns, students, apprentices, or trainees; OR
4. Independent contractors paid below the Virginia median hourly wage for all occupations (per BLS for the preceding year).

EXCLUSION: Employees whose earnings derive, in whole or in predominant part, from sales commissions, incentives, or bonuses are NOT low-wage employees, regardless of FLSA status.

Application: [EMPLOYEE] [☐ IS / ☐ IS NOT] a low-wage employee because: [explain — e.g., annual salary $[___], FLSA classification: ☐ exempt / ☐ non-exempt, commission/bonus structure: ____________].

If "low-wage employee" — STOP. The covenant is statutorily unenforceable. The Company is exposed to a $10,000 civil penalty per violation, plus the employee's private suit for liquidated damages, lost compensation, attorney fees, and costs (2-year SOL).

B. Posting compliance. Has the Company posted a copy of § 40.1-28.7:8 (or a DOLI-approved summary) where other employment notices appear? [☐ Yes — confirm posting date and location] [☐ No — non-compliant; assess posting penalty exposure].

IV. Reasonableness Analysis (assuming the employee is NOT a low-wage employee)

Virginia courts apply the tripartite test from Modern Environmental, Inc. v. Stinnett, 263 Va. 491, 494 (2002), strictly construed against the employer (Home Paramount Pest Control Cos. v. Shaffer, 282 Va. 412 (2011)):

Prong 1 — No greater than necessary to protect a legitimate business interest.

Recognized interests: confidential information, customer relationships, employer's investment in training. The function-scope-duration must be tightly tailored.

• Function: [Describe restricted activity precisely. WARNING: "any capacity" or "any business engaged in [industry]" formulations are routinely held overbroad. Home Paramount struck a 50-year-old pest control covenant for using "directly or indirectly" as to "any business similar to the type … conducted by [employer]" without role-tailoring.]
• Geographic scope: [Define narrowly to areas of actual employee activity or customer contact.]
• Duration: [Typically 6 months to 2 years. Longer requires exceptional showing.]

Prong 2 — Not unduly harsh / oppressive on employee's livelihood.

The court weighs the employee's ability to find comparable work. Restrictions barring an employee from his or her general trade or profession in a meaningful geographic area for an extended period will fail.

Prong 3 — Not against public policy.

Healthcare, professional services, and public-safety roles draw heightened scrutiny.

V. No Blue-Pencil

Virginia does NOT permit judicial reformation of overbroad covenants. If any prong fails, the entire covenant is unenforceable. Drafters must therefore err on the side of narrowness.

VI. Recommendations

1. [☐ Confirm employee is NOT a low-wage employee (salary above Commonwealth threshold AND FLSA-exempt OR commission/bonus-derived)]
2. [☐ Define function with specificity — describe the role(s) being restricted, not "any capacity"]
3. [☐ Narrow geography to: __________________]
4. [☐ Reduce duration to: ___ months]
5. [☐ Add carve-out preserving customer service where customer initiates contact]
6. [☐ Pair non-compete with NDA (preserved under § 40.1-28.7:8(C)) and narrowly tailored non-solicit]
7. [☐ Confirm § 40.1-28.7:8 posting is current and properly located]
8. [☐ Document independent consideration if mid-employment covenant]

VII. Conclusion

[CONCISE FINAL ASSESSMENT — 2–4 sentences.]

Part B — Non-Compete Agreement

EMPLOYEE NON-COMPETITION, NON-SOLICITATION, AND CONFIDENTIALITY AGREEMENT

This Employee Non-Competition, Non-Solicitation, and Confidentiality Agreement (the "Agreement") is entered into as of [__/__/____] (the "Effective Date") between [EMPLOYER LEGAL NAME], a [STATE] [ENTITY TYPE] with its principal place of business at [ADDRESS] ("Company"), and [EMPLOYEE FULL LEGAL NAME], residing at [ADDRESS] ("Employee"). Each a "Party" and collectively the "Parties."

1. Recitals and Consideration

A. The Company is engaged in [DESCRIBE BUSINESS — specific].

B. The Employee will have access to (i) Confidential Information; (ii) customer relationships developed through Company investment; and (iii) [☐ specialized training] [☐ trade secrets].

C. Statutory Eligibility Representation. The Company represents, and the Employee acknowledges, that the Employee is NOT a "low-wage employee" within the meaning of Va. Code § 40.1-28.7:8 because the Employee (i) earns more than the Commonwealth's average weekly wage and is FLSA-exempt, or (ii) derives earnings in whole or in predominant part from sales commissions, incentives, or bonuses. The Employee's annual compensation is $[__________] and the Employee's FLSA classification is [☐ exempt / ☐ commission-/bonus-derived].

D. In consideration of [☐ initial employment] [☐ signing payment of $[___]] [☐ promotion] [☐ equity grant] [☐ other: __________], and the mutual covenants, the Parties agree as follows.

2. Definitions

"Competitive Business" means a business that [DESCRIBE WITH SPECIFICITY — products/services, not the entire industry].

"Confidential Information" means non-public Company information regarding [customers, pricing, methods, financials, technology], excluding information that is publicly known, lawfully obtained from a third party, or already known to the Employee before disclosure.

"Restricted Period" means the period of Employee's employment plus [______] months following termination of employment for any reason.

"Restricted Territory" means [DEFINE — e.g., the counties/cities in Virginia in which the Employee performed services or had material customer contact during the 12 months preceding termination; or a defined radius from the Company's [LOCATION]].

"Restricted Role" means a role that involves the same or substantially similar duties to those the Employee performed for the Company during the 12 months preceding termination — specifically, [LIST DUTIES].

"Restricted Customers" means customers and actively-pursued prospects of the Company with whom the Employee had material contact, or about whom the Employee received Confidential Information, during the 12 months preceding termination.

3. Confidentiality

The Employee shall not, during or after employment, use or disclose Confidential Information except in the proper performance of duties or as required by law. Upon termination, the Employee shall return or destroy all Confidential Information. This Agreement does not prohibit the Employee from reporting possible violations of law to a government agency.

4. Non-Competition

During the Restricted Period and within the Restricted Territory, the Employee shall not engage in a Restricted Role for any Competitive Business. This restriction does not prohibit the Employee from accepting employment with a Competitive Business in a role that is materially different from the Restricted Role.

5. Non-Solicitation of Customers

During the Restricted Period, the Employee shall not solicit any Restricted Customer for purposes of providing products or services that compete with the Company. This Section does not prohibit the Employee from providing services to a customer who initiates contact without solicitation by the Employee.

6. Non-Solicitation of Employees

During the Restricted Period, the Employee shall not solicit any Company employee with whom the Employee worked or had material contact during the 12 months preceding termination to terminate employment with the Company.

7. Acknowledgments

The Employee acknowledges that the restrictions are reasonable, necessary to protect legitimate business interests, and that the Employee has had an opportunity to consult with counsel.

8. Remedies

The Company may seek temporary, preliminary, and permanent injunctive relief in the Circuit Court for [______] County (or City of [______]), Virginia, in addition to monetary damages and reasonable attorneys' fees as available under law.

9. No Reformation Beyond Severability

The Parties acknowledge that Virginia courts do not blue-pencil overbroad non-compete covenants. If a court of competent jurisdiction holds any provision of this Agreement unenforceable, that provision shall be severed and the remaining provisions shall continue in full force. The Parties have drafted each restriction narrowly with this rule in mind.

10. Governing Law and Forum

This Agreement is governed by the laws of the Commonwealth of Virginia, without regard to conflict-of-laws principles. Exclusive forum: Circuit Court of [______] County / City of [______], Virginia.

11. Severability; Entire Agreement; Counterparts

If any provision is unenforceable, the remaining provisions remain in effect. This Agreement is the entire agreement of the Parties on its subject matter. Executable in counterparts including electronic signatures.

12. Signatures

Part C — Pre-Signing Checklist

☐ Confirmed Employee is NOT a "low-wage employee" under Va. Code § 40.1-28.7:8 (annual pay above Commonwealth threshold AND FLSA-exempt, OR pay derived in whole/predominant part from commissions/incentives/bonuses)
☐ Documented Employee's annual pay, FLSA classification, and commission/bonus structure
☐ Defined "Competitive Business" with specificity — not the entire industry
☐ Defined "Restricted Role" by reference to the Employee's actual duties
☐ Narrowed geographic scope to areas of actual employee activity or customer contact
☐ Limited duration to no more than [_____] months (typically 6–24)
☐ Added carve-out for customer-initiated contact
☐ Confirmed independent consideration if mid-employment covenant
☐ Posted Va. Code § 40.1-28.7:8 (or DOLI-approved summary) with other state/federal employment notices
☐ Confirmed posting is current and accessible to all employees
☐ Paired covenant with NDA (preserved under § 40.1-28.7:8(C)) and narrow non-solicit
☐ Provided Employee reasonable opportunity to review and consult counsel
☐ Drafted each restriction narrowly — no reliance on judicial blue-pencil
☐ Reviewed for ambiguity (Home Paramount strict construction risk)
☐ Retained executed original; provided executed copy to Employee
☐ Calendared termination-event re-review (re-assess enforceability before sending cease-and-desist or filing suit)
☐ Confirmed forum and choice-of-law clauses align with Virginia law

Sources and References

• Va. Code § 40.1-28.7:8 (Covenants not to compete prohibited; low-wage employees) — https://law.lis.virginia.gov/vacode/title40.1/chapter3/section40.1-28.7:8/
• Va. Code § 65.2-500 (Average weekly wage definition) — https://law.lis.virginia.gov/vacode/65.2-500/
• 2025 S.B. 1218 (amendment expanding low-wage definition to non-exempt FLSA employees, effective 7/1/2025) — https://lis.virginia.gov/bill-details/20251/SB1218
• VA Department of Labor and Industry — Average Weekly Wage Notice — https://doli.virginia.gov/notice-of-the-average-weekly-wage-for-2025/
• Modern Env'l, Inc. v. Stinnett, 263 Va. 491 (2002) — Virginia Supreme Court (tripartite reasonableness test)
• Home Paramount Pest Control Cos. v. Shaffer, 282 Va. 412 (2011) — Virginia Supreme Court (strict construction; no blue-pencil)
• Omniplex World Servs. Corp. v. US Investigations Servs., Inc., 270 Va. 246 (2005)
• Assurance Data, Inc. v. Malyevac, 286 Va. 137 (2013)
• Va. Code § 59.1-336 et seq. (Virginia Uniform Trade Secrets Act) — https://law.lis.virginia.gov/vacode/title59.1/chapter26/
• Virginia DOLI non-compete posting resources — https://doli.virginia.gov/
• Disclaimer: This template does not constitute legal advice. Consult licensed Virginia counsel.