Virginia Law Tied Severance to Noncompete Enforceability
Employers must now provide severance for termination without cause to keep noncompete agreements legally binding.
Updated on Oct. 13, 2026 in Jobs — General
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Governor Abigail Spanberger signed SB170 into law, mandating that restrictive covenants are unenforceable if an employee is fired without cause and without severance. The law applies to all agreements entered into, amended, or renewed on or after July 1, 2026.
Why it matters
This statute forces companies to choose between paying severance to protect their restrictive covenants or losing the ability to enforce them entirely. It addresses the enforceability of noncompete agreements specifically for workers terminated without cause.
Violations of the statute carry civil penalties of up to $10,000 per incident, while failure to post the required workplace notice can result in fines reaching $1,000 for repeat offenses. These mandates apply to all employees in the state.
The players
Abigail Spanberger
The Governor of Virginia who signed SB170 into law.
The details
To maintain enforceability of noncompete agreements, employers must now explicitly disclose severance benefits at the time the covenant is signed. The law excludes instances of voluntary resignation or termination for cause, focusing strictly on involuntary departures. Furthermore, businesses are required to prominently display the statute or a state-approved summary in the workplace to ensure compliance.
Timeline
July 1, 2026: The effective date for all new, amended, or renewed noncompete agreements.
Market Landscape
This legislation places Virginia within the broader, ongoing regulatory trend of increasing scrutiny over the use of restrictive covenants in employment contracts. It follows the pattern set by the Federal Trade Commission noncompete ban by introducing new conditions for enforceability.
Employers should audit all existing employment contracts and update onboarding documentation to include severance disclosures ahead of the July 1, 2026 deadline. Management must also prepare to post the required workplace notices to avoid statutory penalties.
The takeaway
Operators must now decide if the value of a noncompete agreement outweighs the cost of mandatory severance for terminated employees. Review your current contract templates with legal counsel to ensure compliance with the disclosure requirements effective July 1, 2026.
Further reading
For more on regulatory updates, explore our Jobs — General section.
Source note: This article includes information reported by HR Daily Advisor.
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