Effective July 1, 2020, Virginia began prohibiting employers from entering into, enforcing or threatening to enforce non-competition agreements with low-wage workers. With certain exceptions, Virginias new lawdefines a low-wage employee as an employee whose average weekly earnings...are less than the average weekly wage of the Commonwealth. According to the most recent data from the Virginia Employment Commission, the average weekly wage is currently $1,204, amounting to approximately $62,600 per year. Notably, the Virginia Employment Commission updates Virginias average weekly wage on a quarterly basis. Employers who violate Virginias new law may incur a $10,000 civil penalty for each violation, plus certain other damages (liquidated damages and lost compensation), as well as attorneys fees and legal costs and fees.
As of January 15, 2020, Rhode Island enacted the Rhode Island Noncompetition Agreement Act, which renders unenforceable non-competition agreements with the following classes of workers: 1) non-exempt employees; 2) undergraduate or graduate students who are interns or short-term employees; 3) employees who are 18 years old or younger; and 4) low-wage employees. Low-wage employee is defined as an employee whose average annual earningsare not more than two hundred fifty percent (250%) of the federal poverty level for individuals as established by the United States Department of Health and Human Services federal poverty guidelines. Currently, the earnings threshold for low-wage employees falls at $31,900 per year.
Effective January 1, 2020, Washington enacted a new law placing significant restrictions on the enforceability of non-competition agreements. Among other restrictions, the Washington law renders void and unenforceable any non-competition agreement with an employee whose earnings from the party seeking enforcement do not exceed $100,000 per year. Likewise, non-competition agreements with independent contractors are void and unenforceable unless the independent contractors earnings from the party seeking enforcement exceed $250,000 per year. The threshold earnings levels will be updated annually by the Washington Department of Labor to account for inflation. An employers violation of the law may result in award of the employee or independent contractors actual damages or a penalty of $5,000, plus legal costs and attorneys fees. Notably, this law is retroactive in nature, so even Washington non-competition agreements entered into before the effective date of the law will be subject to the new laws requirements.
Rhode Island, Virginia and Washington join an increasing number of states prohibiting non-competition agreements with individuals classified as low-wage workers according to various state-specific calculations. Employers should ensure their restrictive covenant agreements comply with any applicable new state laws and may also consider utilizing less-restrictive covenants, such as non-solicitation covenants and confidentiality / non-disclosure covenants, to protect business interests.
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