Two New Noteworthy Laws Take Effect in Virginia on July 1, 2020

For those who do business or litigate in Virginia, you should be aware of two noteworthy laws that take effect July 1, 2020.

Non-Compete Ban for Low-Wage Employees

With the first, found here, Virginia becomes the latest state to ban covenants not to compete for low wage employees (as defined by the statute). The prohibition applies to agreements entered into on or after July 1, 2020. (Presumably, the law would not apply to any covenant not to compete already in effect.)

As with other laws banning non-competes for low wage employees, Virginia’s law provides for a private cause of action (including attorneys’ fees and costs) and exempts non-disclosure agreements restricting trade secrets or confidential information. The law also contains a civil penalty and posting requirements.

Interestingly, the definitional paragraph states that a non-compete “shall not restrict an employee from providing a service to a customer or client of the employer if the employee does not initiate contact with or solicit the customer or client.” This provision, however, is not tied to the “low-wage employee” requirement and, in practice, is often used in conjunction with a non-solicitation provision.  The non-solicitation provision prevents the departing employee from contacting former customers, but issues arise (and litigation ensues) when the employee claims that the former customer contacted the employee first (and therefore there is no solicitation). This is when the non-compete would usually come into play.  It remains to be seen how Virginia interprets the clause and whether it will apply it to all departing employees regardless of income.

For a post concerning Maryland’s law, see here.

Private Cause of Action for Misclassified Workers

The second law, found here, creates a private cause of action for misclassified workers if their employers had knowledge of the misclassification. Under the law, individuals who perform services for remuneration are presumed to be employees unless it is shown that the individuals are independent contractors as determined by the Internal Revenue Service guidelines. (Bear in mind that different states, and different agencies, utilize different employee/contractor tests.) The law provides for expansive damages, including wages and benefits, expenses incurred by the employee that would otherwise have been covered by insurance, and costs and attorneys’ fees.