Covenants Not to Compete with Low Wage Employees

Tuesday, June 30, 2020

(Part Four of a Four-Part Series

By Kristina Keech Spitler, Esq. and Brendan F. Cassidy, Esq.

A new law prohibits Virginia employers from entering into, enforcing, or threatening to enforce non-compete agreements with low-wage employees. 

A “low-wage employee” is defined as a worker whose average weekly earnings during the previous 52 weeks “are less than the average weekly wage of the Commonwealth” (emphasis added).  The Virginia Employment Commission (“VEC”) determines the average weekly wage each quarter. Currently, for the first quarter of 2020, the average weekly wage is $1,204.00 a week or $62,608.00 a year.  If an employee’s average weekly earnings fall below the VEC’s average weekly earnings – they qualify as low-wage employees. The law also covers low-wage interns, students, apprentices, and trainees.

The new law also applies to independent contractors who are compensated for their services at an hourly rate that is less than the median hourly wage for the Commonwealth as reported by the Bureau of Labor Statistics (currently $20.30 per hour).

Under the new law, low-wage employees (including interns, students, apprentices, and trainees) and low-wage independent contractors subject to a non-compete agreement may bring a civil action against an employer and seek appropriate relief, including enjoining the conduct of the employer, ordering payment of liquidated damages, and being awarded lost compensation, damages, and reasonable attorney fees and costs. Employers who violate the law are also subject to a civil penalty of $10,000 per violation.

Employers should be cautious if they have a non-compete agreement with an employee near the low wage threshold since the VEC updates average annual wages each quarter, and the new law does not identify a date employers should use to determine whether an individual qualifies as a  low-wage employee. To illustrate how easily an employee can qualify as having a low wage, in January 2020 an individual who made $58,500 qualified as low wage, and as of April 2020, that number jumped to $62,608.

Posting Requirement: The new law also requires employers to post in the workplace a notice of the prohibition against non-compete agreements for low-wage employees. Employers will be issued a warning for their first violation of the posting requirement and will be subject to a civil penalty thereafter.

For further information or questions about these new laws, or for any questions regarding employment laws applicable to Virginia employers, please contact Ms. Spitler or Mr. Cassidy at Vanderpool, Frostick & Nishanian.  The attorneys in the employment law department of VFN are available to help you revise your employee handbook and policies as well as provide training so that your organization complies with these new and other applicable law.  Alternatively, if your organization does not have an employee handbook, our firm can draft a handbook tailored to meet your business’s needs.

For further information or questions, please visit our site
Employment Law or Call Us at 703-369-4738