Bill Text: VA SB360 | 2024 | Regular Session | Comm Sub
Bill Title: Employment; definitions, covenants not to compete prohibited, limitations, civil penalty.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Engrossed - Dead) 2024-02-08 - Defeated by Senate (11-Y 28-N 1-A) [SB360 Detail]
Download: Virginia-2024-SB360-Comm_Sub.html
Be it enacted by the General Assembly of Virginia:
1. That §40.1-28.7:8 of the Code of Virginia is amended and reenacted as follows:
§40.1-28.7:8. Covenants not to compete prohibited; limitations; civil penalty.
A. As used in this section:
"Business entity" means any (i) partnership, including a limited partnership or a limited liability partnership; (ii) limited liability company, including a series limited liability company; or (iii) corporation.
"Covenant not to compete" means a covenant or agreement, including a provision of a contract of employment, between an employer and employee that restrains, prohibits, or otherwise restricts an individual's ability, following the termination of the individual's employment, to compete with his former employer. A "covenant not to 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.
"Low-wage employee" means an employee whose
average weekly earnings, calculated by dividing the employee's earnings during
the period of 52 weeks immediately preceding the date of termination of
employment by 52, or if an employee worked fewer than 52 weeks, by the number
of weeks that the employee was actually paid during the 52-week period, are
less than the average weekly wage of the Commonwealth as determined pursuant to
subsection B of §65.2-500. "Low-wage employee" includes interns,
students, apprentices, or trainees employed, with or without pay, at a trade or
occupation in order to gain work or educational experience. "Low-wage
employee" also includes an individual who has independently contracted
with another person to perform services independent of an employment
relationship and who is compensated for such services by such person at an
hourly rate that is less than the median hourly wage for the Commonwealth for
all occupations as reported, for the preceding year, by the Bureau of Labor
Statistics of the U.S. Department of Labor. For the purposes of this section,
"low-wage employee" shall not include any employee whose earnings are
derived, in whole or in predominant part, from sales commissions, incentives,
or bonuses paid to the employee by the employer.
"Owner of a business entity" means any (i) partner, in the case of a business entity that is a partnership; (ii) member, in the case of a business entity that is a limited liability company; or (iii) owner of capital stock, in the case of a business entity that is a corporation.
"Ownership interest" means (i) a partnership interest, in the case of business entity that is a partnership; (ii) a membership interest, in the case of a business entity that is a limited liability company; or (iii) a capital stockholder, in the case of a business entity that is a corporation.
"Subsidiary" means any business entity over which a selling business entity has voting control or from which a selling business entity has a right to receive a majority share of distributions upon dissolution or other liquidation of the business entity.
B. No employer shall enter into, enforce, or threaten to
enforce a covenant not to compete with any low-wage employee, subject
to the limitations of subsection C.
C. 1. Nothing in this section shall serve to limit the creation or application of nondisclosure agreements intended to prohibit (i) the taking, misappropriating, threating to misappropriate, or sharing of certain information, including trade secrets, as defined in §59.1-336, and proprietary or confidential information or (ii) the solicitation of an employer's clients that an employee learned about during the course of employment, provided that such nondisclosure agreement does not otherwise restrict competition in violation of this section.
2. Nothing in this section shall prohibit any (i) person who sells the goodwill of a business entity; (ii) owner of a business entity selling or otherwise disposing of such owner's ownership interest in the business entity; or (iii) owner of a business entity that sells (a) all or substantially all of its operating assets together with the goodwill of the business entity, (b) all or substantially all of the operating assets of a division or a subsidiary of the business entity together with the goodwill of such division or subsidiary, or (c) all of the ownership interest of any subsidiary from agreeing with the buyer to refrain from carrying on a similar business within a specified geographic area in which the business entity, division, or subsidiary conducts business, provided that the buyer, or any person deriving title to such goodwill or ownership interest from the buyer, carries on a like business therewith.
3. Nothing in this section shall prohibit any partner in a partnership, including a limited partnership or a limited liability partnership, upon or in anticipation of a dissolution of such partnership or such partner's dissociation from such partnership, from agreeing that such partner will not carry on a similar business within a specified geographic area where such partnership conducts business, provided that any other member of the partnership, or any person deriving title to such partnership or its goodwill from any member of the partnership, carries on a like business therewith.
4. Nothing in this section shall prohibit any member of a limited liability company, including a series limited liability company, upon or in anticipation of a dissolution of such limited liability company or such member's dissociation from such limited liability company, from agreeing that such member will not carry on a similar business within a specified geographic area where such limited liability company conducts business, provided that any other member of such limited liability company, or any person deriving title to such limited liability company or its goodwill from any member of the limited liability company, carries on a like business therewith.
D. A low-wage An employee may bring a civil
action in a court of competent jurisdiction against any former employer or
other person that attempts to enforce a covenant not to compete against such
employee in violation of this section. An action under this section shall be
brought within two years of the latter of (i) the date the covenant not to
compete was signed, (ii) the date the low-wage employee learns of the
covenant not to compete, (iii) the date the employment relationship is
terminated, or (iv) the date the employer takes any step to enforce the
covenant not to compete. The court shall have jurisdiction to void any covenant
not to compete with a low-wage an employee and to order all
appropriate relief, including enjoining the conduct of any person or employer,
ordering payment of liquidated damages, and awarding lost compensation,
damages, and reasonable attorney fees and costs. No employer may discharge,
threaten, or otherwise discriminate or retaliate against a low-wage
an employee for bringing a civil action pursuant to this section.
E. Any employer that violates the provisions of subsection B as determined by the Commissioner shall be subject to a civil penalty of $10,000 for each violation. Civil penalties owed under this subsection shall be paid to the Commissioner for deposit in the general fund.
F. If the court finds a violation of the provisions of this section, the plaintiff shall be entitled to recover reasonable costs, including costs and reasonable fees for expert witnesses, and attorney fees from the former employer or other person who attempts to enforce a covenant not to compete against such plaintiff.
G. Every employer shall post a copy of this section or a summary approved by the Department in the same location where other employee notices required by state or federal law are posted. An employer that fails to post a copy of this section or an approved summary of this section shall be issued by the Department a written warning for the first violation, shall be subject to a civil penalty not to exceed $250 for a second violation, and shall be subject to a civil penalty not to exceed $1,000 for a third and each subsequent violation as determined by the Commissioner. Civil penalties owed under this subsection shall be paid to the Commissioner for deposit in the general fund.
The Commissioner shall prescribe procedures for the payment of proposed assessments of penalties that are not contested by employers. Such procedures shall include provisions for an employer to consent to abatement of the alleged violation and to pay a proposed penalty or a negotiated sum in lieu of such penalty without admission of any civil liability arising from such alleged violation.
2. That nothing in this act shall invalidate, alter, or otherwise affect any contracts, covenants, or agreements entered into or renewed prior to July 1, 2024.
