The Virginia Department of Labor and Industry (DOLI) announced recently that the average weekly wage, which is used to define “low wage employee” in the Commonwealth would increase to $1,410 per week in 2024, up from $1,343 per week in 2023. Why might that matter if you are a Virginia employer?

Since 2020, Virginia law has prohibited employers from entering, enforcing, or even threatening to enforce a “covenant not to compete,” with “low wage employees.”  “Covenant not to compete” is defined broadly under the statute as any agreement that “restrains, prohibits, or otherwise restricts an individual’s ability to compete with his former employer. See previous blog for additional information. 

With the definition of “low wage employee” tied to the median hourly rate in Virginia, the latest increase in the median hourly rate means that Virginia employers may not enter into or enforce a “covenant not to compete,” with any employee who earns less than $73,320 per year. The law provides for stiff penalties on Virginia employers for violations of the ban on noncompetes with low wage employees, allowing such employees to recover lost compensation, liquidated damages and reasonable costs and attorneys’ fees.

For Washington, D.C., area employers doing business across jurisdictions, the District of Columbia and the State of Maryland also have laws restricting the use of noncompetes for low wage employees, with the District of Columbia banning the use of noncompetes for all but “highly compensated employees” (generally, $150,000 or more), and  Maryland restricting the use of noncompetes for employees earning less than 150% of the State’s minimum wage rate (as of January 1, 2024, that means an hourly wage rate $22.50).

Noncompete agreements have also come under increasingly close scrutiny at the federal level, with the Federal Trade Commission issuing a proposed rule in January 2023,  that, with few exceptions, would make it unlawful under Section 5 of the Federal Trade Commission Act for an employer to enter into a non-compete with a worker or maintain a non-compete clause with a worker, meaning that employers would have to rescind existing non-competes with workers as of the effective date of the new rule.  Read more about the FTC proposed rule here. More recently, Jennifer Abruzzo, National Labor Relations Board (NLRB) General Counsel (GC), issued a memorandum to all NLRB Regional Directors making it clear that, in her view, except in a few narrow circumstances, employer noncompete unreasonably tend to chill employees in the exercise of their statutory rights, in violation of the National Labor Relations Act. Read more about the GC Memo here.

With these new and pending changes, it is important for employers to consider their current reliance on, and future potential need to, restrict the ability of workers to engage in competitive activities both during and after termination of employment. If you have questions about your current policies and practices to ensure compliance with existing Virginia, Maryland, or District of Columbia employment laws, please contact Doug Taylor, at rdougtaylor@beankinney.com or (703) 525-4000.

This article is for informational purposes only and does not contain or convey legal advice. Consult a lawyer. Any views or opinions expressed herein are those of the author and are not necessarily the views of any client.