A number of states have recently acted to introduce new limitations on employers’ use of restrictive covenants, continuing a trend of tightening up on employers’ options for protecting their confidential information, especially in the use of non-competition agreements. On July 1, 2026, Tennessee and Virginia implemented expansive restrictions on non-competes for employees earning less than certain wage thresholds. And, earlier this year, Washington passed a near total ban on non-competes, which is set to take effect June 30, 2027. In addition, Maine, New Hampshire, and Utah recently enacted non-compete restrictions applicable to the healthcare and veterinarian medicine industries. Below is a roundup on these restrictive covenant updates.
Virginia
Under existing Virginia law enacted in 2020 and amended in 2025, employers were already prohibited from entering into, enforcing, or threatening to enforce a covenant not to compete with any “low-wage employee” or healthcare professional. The current law defines “low-wage employees” as (i) employees whose average weekly earnings during the 52 weeks preceding the termination are less than the average weekly earnings in Viriginia, and (ii) employees who, regardless of their average weekly earnings, are entitled to overtime pay under the Fair Labor Standards Act (in other words, all FLSA non-exempt employees). For 2026, the average weekly wage in Viriginia is $1,507.01, or $78,364.52 per year.
Effective July 1, 2026, the amended Virginia law prohibits employers from enforcing non-competes against all employees (not just “low-wage employees”) who have been terminated without cause and did not receive severance or other separation payments. The statute, which does not provide a definition of “cause,” requires that the employer disclose the severance or other monetary payments to the employee upon the execution of the non-compete. Employers who plan to enforce non-competes against discharged employees should maintain strong records documenting the reasons for any terminations, including performance issues or misconduct, and ensure appropriate separation payments are timely paid.
Washington
On March 23, 2026, Governor Bob Ferguson signed HB 1155, further amending RCW Chapter 49.62, Washington’s non-compete statute, which had previously been amended in 2024 to significantly restrict non-competes (to read more on the 2024 amendment, view our blog post). Washington’s 2024 amendment banned non-competes for workers—both employees and independent contractors—whose earnings are below certain annually adjusted income thresholds.
This new amendment, which takes effect June 30, 2027, broadly voids most non-compete covenants in Washington, regardless of when the parties entered into the agreement. Moreover, the amendment provides that an employer’s attempt to enter into or enforce a non-compete, as well as any threat to enforce or any representation that a worker is subject to a non-compete, now violates the statute.
The Washington law presently defines a “noncompetition covenant” as any written or oral agreement “that prohibits or restrains an employee or independent contractor from engaging in a lawful profession, trade, or business of any kind.” Once the amendment takes effect, a prohibited non-compete agreement will also include an agreement that “threatens, demands, requires, or otherwise effectuates that an individual return, repay, or forfeit any right, benefit, or compensation, as a consequence of the individual engaging in a lawful profession, trade, or business of any kind.” This expanded definition could encompass equity awards and incentive compensation arrangements, which often include forfeiture-for-competition provisions.
The amendment further confirms that a provision that prohibits a former employee from transacting or accepting business with a customer, patient, or client is an unlawful noncompetition covenant. However, the amendment clarifies that narrowly tailored customer and employee non-solicits, confidentiality agreements, and covenants tied to the sale of a business interest do not run afoul of the Washington law banning non-competes. With respect to customer non-solicits, the amendment states that a non-solicitation agreement is not an unlawful non-compete so long as it (i) pertains to current or prospective customers, clients, patients with whom the employee “established or substantially developed a direct relationship … through the employee’s work for the employer” and (ii) is no longer than 18 months following the employee’s termination of employment.
In addition to proactively taking steps now to update covenants to comply with the amendment, employers are required by the amendment to “make reasonable efforts” to give written notice to all current and former employees and independent contractors who remain subject to a noncompetition covenant that such covenants are void and unenforceable.
Tennessee
As of July 1, 2026, employers in Tennessee must adhere to new requirements for non-competes to be enforceable against their employees. Unlike the Washington State law, the Tennessee law does not apply retroactively to existing non-compete agreements.
Tennessee HB 1034 prohibits employers from “requiring, requesting, or enforcing” non-compete agreements with employees whose annualized compensation is less than $70,000 per year. The law provides that “annualized compensation” includes wages, salary, commissions, nondiscretionary bonuses, and other forms of remuneration. Annualized compensation for hourly employees is calculated by multiplying the hourly rate by forty, then multiplying that result by fifty-two.
HB 1034 also provides that a restraint against a former employee or independent contractor that is two years or fewer in duration is presumed reasonable when not associated with the sale or ownership of the assets of a business; in such latter cases, the rebuttable presumption extends for up to five years. The new law does not prohibit other types of restrictive covenants, such as confidentiality agreements, customer non-solicits, or employee non-solicits. Employers in Tennessee must continue to adhere to common law rules of reasonableness regarding duration and scope for covenants to be enforceable.
Industry-Specific Updates
- Maine. On July 29, 2026, Maine House Bill 2200 became effective, amending 26 M.R.S.A. § 599-A to prohibit entering into a non-compete with health care practitioners (broadly defined as an individual who is qualified or licensed to perform or provide health care services in the state) who are not part owners of the employer. The amendment also requires a non-compete covenant to “recognize an individual’s right to choose that individual’s own health care practitioner.” The new law applies only to non-compete agreements entered into or renewed after July 29, 2026.
- New Hampshire. With the enactment of N.H. Rev. Stat. § 328-D:20 on July 7, 2026, New Hampshire expanded its existing restrictions on healthcare provider non-competes to prohibit non-competes with physician assistants. Previously, New Hampshire’s ban on healthcare provider non-competes was limited to just physicians licensed by the state’s medical board. See N.H. Rev. Stat. § 329:31-a. This new prohibition only applies to new contracts or renewals with physician assistants entered into after July 7, 2026.
- Utah. Effective May 6, 2026, House Bill 270, Healthcare Worker Post-Employment Amendments, banned post-employment non-competes for most licensed healthcare workers, with certain exceptions for arrangements that include a “reasonable severance agreement” or that are related to or arising out of the sale of a business. Also effective May 6, 2026, Senate Bill 111, Veterinary Post-Employment Amendments, voids most non-competes and non-solicits for veterinarians, unless they own at least 5% of the business.
If you have questions about these new laws, please contact members of Covington’s employment practice group.
Recent Comments