Virginia’s 2026 employment law overhaul: What employers need to know

Non-competes — Severance requirement (SB 170)

SB 170 further expands Virginia’s restrictions on non-compete agreements by imposing a new enforceability condition tied to the circumstances of an employee’s separation from employment. The law provides that a covenant not to compete is unenforceable if the employer terminates the employee without cause and does not provide severance or other monetary payment, thereby effectively requiring employers to pair restrictive covenants with post-employment compensation in no-cause termination scenarios. The statute also requires that any such severance or payment be disclosed at the time the covenant not to compete is executed.

Notably, the statute does not define “cause,” nor does it specify the amount or sufficiency of the required “severance benefits or other monetary payment,” leaving open questions as to what constitutes a termination for cause and what level of consideration will be deemed adequate. The law also does not address whether such consideration may be made contingent on the employee’s execution of a release of claims or other post-employment conditions, creating potential uncertainty for employers structuring separation packages tied to restrictive covenants. Like the changes for health care professionals, this law applies prospectively and does not invalidate, alter, or otherwise affect contracts, covenants, or agreements entered into or renewed prior to July 1, 2026.

These changes build on Virginia’s preexisting statutory limits on non-competes. Since 2020, Virginia has prohibited employers from entering into non-compete agreements with “low-wage employees,” and, effective in 2025, that prohibition was expanded to cover all non-exempt employees. Together with SB 170 and the new health care-specific restrictions described below, these developments reflect a continued legislative trend in Virginia toward narrowing the circumstances in which covenants not to compete may be used.

Non-competes — Health care professionals (HB 627 / SB 128)

HB 627 / SB 128 amends Virginia’s noncompete statute to prohibit entering into, enforcing, or threatening to enforce a covenant not to compete with a health care professional—regardless of their income level—significantly limiting employers’ ability to restrict post-employment competition in the health care sector.

A “health care professional” is defined as “any person licensed, registered, or certified by the Board of Medicine, Nursing, Counseling, Optometry, Psychology, or Social Work.”

The statute preserves key carveouts, including the continued enforceability of confidentiality and nondisclosure agreements, as well as narrowly tailored customer non-solicitation provisions for health care professionals. It also expressly permits covenants not to compete in the context of the sale of a business, provided the restrictions are reasonable in scope, duration, and geographic reach. In addition, employers may continue to use repayment or “clawback” provisions requiring departing health care professionals to reimburse certain recruitment- or training-related costs if they have been employed for fewer than five years.

Importantly, the law applies prospectively and does not invalidate, alter, or otherwise affect contracts, covenants, or agreements entered into or renewed prior to July 1, 2026.

Salary history ban and pay transparency (HB 636 / SB 215)

Virginia joins a growing number of states prohibiting employers from seeking or relying on a job applicant’s salary history during the hiring process and requiring disclosure of pay information in job postings.

First, employers may not seek or rely on a prospective employee’s wage or salary history at any stage of the hiring process. Employers are also prohibited from taking adverse action against applicants or employees who decline to provide such information or who request a pay range. If a candidate voluntarily discloses compensation history, the employer may consider the information but only to support offering compensation above the employer’s initial offer and only insofar as doing so complies with equal pay laws.

Second, employers must disclose, in all public and internal job postings, the wage or salary (or a good-faith wage or salary range) tied to the position, with the range determined based on factors such as existing pay scales, comparable roles, or budgeted amounts.

Enforcement authority is shared between the Attorney General, who may pursue civil penalties of up to US$1,000 for a first violation and US$5,000 for subsequent violations, and private plaintiffs, who may bring suit within one year and recover damages or equitable relief. Importantly, the statute includes a built-in “cure” provision for pay transparency violations relating to job postings. Before a prospective employee may bring such action based on a failure to include a required pay range or to establish one in good faith, the employer must first be given written notice of the deficiency. If the employer corrects the posting in the original posting locations within 15 business days of receiving that notice, no private lawsuit may be brought for that violation. This cure opportunity is limited to posting-related violations and does not apply to other prohibited conduct, such as seeking salary history or retaliating against applicants. Additionally, the cure opportunity does not apply to enforcement by the Attorney General.

Heightened exposure for wage payment and misclassification liability (HB 238)

HB 238 significantly increases employer risk and potential liability under Virginia’s wage payment laws in several ways.

First, it broadens the statutory definition of “wages” to include a wider range of compensation, such as commissions, bonuses, legally required prevailing wages, and—notably—damages arising from worker misclassification. By expressly incorporating misclassification damages into the definition of wages, the law allows workers who have been misclassified as independent contractors to pursue damages through Virginia’s wage payment statute and access the full suite of remedies available thereunder.

Second, HB 238 sets a three-year statute of limitations for wage and hour and misclassification claims and allows such claims to be pursued through collective actions.

Third, the law expands the definition of “employer” to mirror the federal Fair Labor Standards Act’s broad standard, which includes persons acting directly or indirectly in the employer’s interest.

Fourth, HB 238 strengthens enforcement mechanisms for wage violations. It authorizes the Commissioner of Labor and Industry as well as the Attorney General (upon referral from the Commissioner) to investigate complaints (including those brought by third parties), issue subpoenas, pursue administrative proceedings, and bring civil actions to recover unpaid wages, damages, and statutory penalties, as well as to obtain injunctive and other equitable relief.

Fifth, the legislation increases liability exposure in the construction context by imposing joint and several liability on general contractors for wage violations committed by subcontractors on certain projects. It also enhances prevailing wage compliance requirements for public works projects, mandates expanded recordkeeping and certification obligations, and requires more robust wage transparency through postings and payroll documentation.

Finally, HB 238 introduces a limited “good faith” safe harbor that allows employers to mitigate exposure to enhanced damages and penalties. Specifically, where an employer demonstrates that a wage violation resulted from a good-faith belief that its conduct complied with the law—and cures the violation within 14 days of “being notified of the violation” by paying all wages owed—courts or the Commissioner shall not award additional damages or penalties beyond the underlying wages. This provision incentivizes prompt remediation while preserving employee entitlement to full wage recovery and does not apply absent timely cure following notice.

Virginia Human Rights Act — Employer size threshold (SB 637 / HB 925)

SB 637 / HB 925 amend the Virginia Human Rights Act (VHRA) to expand coverage, extend filing deadlines, and increase procedural protections for employees and other individuals pursuing discrimination claims.

Most notably, SB 637 significantly broadens employer coverage thresholds by lowering the threshold definition of “employer” from 15 or more employees to five or more employees, thereby bringing many smaller employers within the scope of the VHRA’s coverage.

Critically, the legislation extends the statute of limitations for filing administrative discrimination charges, increasing the filing window from 300 days to two years from the alleged discriminatory act. This change materially expands potential exposure for employers by lengthening the period during which claims may be asserted.

Arbitration Fairness Act (SB 227)

SB 227 enacts the Virginia Arbitration Fairness Act, which will reshape the use of pre-dispute arbitration agreements in the consumer and employment contexts by imposing new procedural and structural requirements on “high-volume arbitration service providers.”

A “high-volume arbitration service provider” is defined as “any arbitration service provider that conducts more than 100 arbitrations per calendar year that arise from a pre-dispute arbitration agreement involving a Virginia-connected transaction.” A “pre-dispute arbitration agreement” includes any agreement to arbitrate a dispute between a consumer and business or between a Virginia employee and his or her employer that had not yet arisen at the time of making such agreement. A “Virginia-connected transaction” broadly covers “any transaction, agreement, or dispute that arises out of, relates to, or is otherwise connected with activities, relationships, or events occurring within the Commonwealth, including any arbitration ordered by a state or federal court located in the Commonwealth.”

Some of the key changes of this law, which apply prospectively to agreements entered into on or after July 1, 2026, are as follows:

• High-volume providers may no longer require employees to accept a particular arbitrator or rely on systems that allow the employer to exert disproportionate influence. Instead, providers must offer a process that gives both parties a meaningful opportunity to participate in selecting a neutral arbitrator, using methods such as strike-and-rank lists, mutual ranking, or random selection from a jointly approved pool.
• Where an employer is required to pay arbitration fees to initiate or proceed with arbitration, failure to pay within 30 days of the due date results in automatic consequences: the employer is deemed in material breach of the arbitration agreement, in default in the arbitration, and to have waived the right to compel arbitration altogether. In that event, the employee may either proceed in court or continue arbitration with fee-shifting, and courts are directed to impose sanctions on the employer if litigation follows.
• Statutes of limitations are tolled during the pendency of arbitration proceedings and related disputes.
• Parties may seek injunctive relief or challenge arbitration awards in court, while the State Corporation Commission may impose civil penalties of up to $10,000 per violation on noncompliant arbitration providers.

Voluntary emergency responders — Retaliation protection (SB 100)

SB 100 establishes a new statutory protection for employees who serve as volunteer emergency responders and prohibits employers from taking adverse action against employees solely because the employee fails to report for work while actively responding to an emergency alarm or serving during a state of emergency as a voluntary emergency responder, provided the employee satisfies certain notice and certification requirements.

Employers are not required to pay an employee for work time missed while serving as a volunteer emergency responder. However, the employee may charge the absence as a vacation day or sick day if such leave has been accrued. The law does not apply to any employee deemed “essential” by statute or contract.

An aggrieved employee may bring a civil action within one year of the prohibited retaliatory action. Courts may order injunctive relief, reinstatement, and compensation for lost wages, benefits, and other remuneration, together with interest and reasonable attorney fees and costs.

Immigration status coercion (HB 675)

HB 675 creates a new standalone prohibition under the Virginia Wage Payment Act that targets employer use of immigration-related threats or coercion as a means of suppressing employee rights. Specifically, the law makes it unlawful for an employer to use or threaten to use an employee’s (or the employee’s family member’s) immigration status to coerce the employee into refraining from exercising rights or engaging in protected activity under Virginia’s minimum wage or wage payment statutes. By defining “coercion” and “threat” broadly to include both explicit and implicit communications tied to immigration status, the statute is designed to reach a wide range of retaliatory or chilling conduct in the wage-and-hour context.

The law provides a complaint mechanism through the Commissioner of Labor and Industry: employees may file a complaint within 180 days of the alleged violation. The Commissioner is authorized to investigate, impose civil penalties, and seek injunctive relief against offending employers. HB 675 also establishes a graduated civil penalty regime for violations, with penalties of up to US$5,000 for a first violation, US$9,000 for a second, and US$12,000 for subsequent violations, with each coercive act or threat treated as a separate violation per affected employee. Importantly, these penalties are in addition to any other liability arising from the underlying wage and hour violation the coercion was intended to facilitate. The statute further preserves all other available remedies under Virginia law, meaning employees may pursue existing retaliation or wage claims in parallel.

Employer action items

Employers should promptly take the following steps to prepare for the new Virginia employment laws taking effect July 1, 2026:

Prohibit salary history inquiries in connection with hiring and implement pay transparency disclosure protocols. Remove any salary history questions from employment applications, interview guides, and recruiter materials, and instruct internal and external recruiters not to solicit or rely on such information. Prepare wage or salary ranges for job postings and ensure the ranges are supportable. Consider whether to train recruiters and hiring managers on compliance with new Virginia pay transparency requirements.

Review wage and hour compliance programs. Consider conducting a privileged review and audit of wage-and-hour compliance practices, including worker classification.

Update restrictive covenants. Determine what severance or other monetary consideration will be offered in connection with a termination without cause for covenants not to compete. Ensure that no covenant not to compete is entered into, enforced, or threatened to be enforced against covered health care professionals (subject to the narrow statutory exceptions), in addition to “low-wage employees.”

Update anti-discrimination policies. Employers with 5-14 employees should adopt compliant anti-discrimination and anti-harassment policies.

Review arbitration agreements. Assess whether to maintain or adjust arbitration agreements in light of the Arbitration Fairness Act for agreements entered on or after July 1, 2026.

Establish volunteer emergency responder policies. Create procedures for employees to provide notice and certification when responding to emergencies and update absence and disciplinary policies to account for the new retaliation protections.

Authored by George W. Ingham, Saydee Schnider, and Amy Folsom Kett.