Protecting Your Workforce After Changes to VA's Non-Compete Ban

Joe Young

Good afternoon. Hello, GovCon HR friends. Welcome to the February 2026 edition of the GovCon HR Round-Up. This is actually our 24th edition of the Round-Up.

Declan Leonard

Unbelievable

So, welcome to some of our long-time loyal listeners. We know there are some of you out there, some of you who've told us so. So welcome back. But obviously also welcome to any first-time listeners who are joining us today here for the first time on the Round-Up. For those of you don't know, my name is Joe Young. I'm the founder and general manager of the GovConPay division of isolved HCM. You guys like that?

Declan Leonard

Yeah, I'm looking at your pen there. Is that an updated one or an old one?

Joe Young

No, I think this I think this is an old one.

Declan Leonard

Collector's Edition.

Joe Young

There you go. The collector's edition. Thank you for asking. For those of you who don't know, GovConPay, we are the only outsourced payroll and HR solutions provider focused exclusively on serving the GovCon marketplace. As always, we are coming to you live today from the studios of BLC Digital Strategies here in Tysons Corner, Virginia.

And thank you to all of our teams, especially the support of our producer, Mr. Todd Castleberry. Before we get started, I also always want to recognize our sponsor and thank our friends from Berkshire and Associates, Berkshire are HR and compliance experts with over 50 years of experience in providing compliance services and technology for organizations looking to build their ideal workforce through compliant nondiscrimination services, work analytics, and pay equity expertise.

So, we always want to welcome any clients from the Berkshire team, as well. As always, I’m here with my intrepid experts, the managing partners of Berenzweig Leonard, employment law experts, Mr. Seth Berenzweig and Mr. Declan Leonard. Declan why don’t you kick us off with an introduction.

Declan Leonard

Great to be here yet again. I can't believe you said 24 of these worth up. Holy cow. That's crazy. Yeah. Declan Leonard, managing partner, as Joe said of Berenzweig Leonard Business Law Firm here in Tysons Corner but serving not only the DMV, but nationwide. And I head up our firm's employment law practice.

Seth Berenzweig

And, I’m Seth Berenzweig, also co-managing partner of our law firm here and run our corporate transactional practice and GovCon and I was on the Olympic curling team in the 1960s, but you were too young, so don't worry about that.

Joe Young

We didn't get coverage of it back then. Didn’t meet the main coverage.

Declan Leonard

Was that synchronized curling? Did they do that?

Seth Berenzweig

There was no social media. So, it wasn't covered a lot.

Joe Young

You were a man before your time.

Declan Leonard

Oh my goodness.

Joe Young

I’ve watched more curling than I've watched anything else on the Olympics. I find it fascinating.

Declan Leonard

Disturbing.

Joe Young

Put you to sleep. It's very relaxing before you go to sleep. So, we digress, I apologize. I will, to our listeners out there, remind everybody if you have any questions as we go through the podcast today, please add them to the chat. Our team is monitoring that. We'll try and push those through, and we'll certainly try and address any questions that we have while we have our time today.

So, today's topic, something that we've touched on over our 24 episodes, mainly because it seems like it's one of these topics that, when we have changes in administration, we always have to address because how it gets, how it gets enforced seems to change. And we've had some change of administration throughout our 24, obviously. And that's the topic of non-compete agreements, non-solicitation agreements. But there's been some unique changes here that we wanted to address it on the show today.

So, Declan, we're coming out of 2025. The competition in the government contracting marketplace is fierce as ever. And as people are trying to maintain work, maintain good employees, that the state of Virginia has just made it a little harder, potentially, to do that. So, tell us a little bit about what Virginia's doing as it relates to this topic.

Declan Leonard

Yeah. So, it's important to remember – and you're right, we have talked about the issue of restrictive covenants, non-competes, over the time. There was a time in the last administration when I think it was a Federal Trade Commission was looking to ban these outright. We're now in a new administration, so it's a little bit more stabilized in terms of this.

But it's important to understand when you talk about non-competes, I find as an employment lawyer, having done this three decades now, people sort of lump non-competes in all together. And I want to make sure that we set the tone for today's discussion. Non-competes are “you're not working for my competitor,” basically. Today, what we're going to be talking about is it's almost like non-compete lite: non-solicitations.

Okay. You can't work for your competitor. But are you going to be able to solicit my customers? Are you going to be able to solicit my employees? And that was the issue. That was before the Virginia Court of Appeals recently. And we're talking about this is within the last two weeks. And the issue was this: In Virginia last year, they said that lower wage workers, those making 78,000 or less a year, could not be subject to non-competes.

So the question then became, okay, “Well what about non-solicitations?” And that issue made its way up to the Court of Appeals of Virginia. Court of Appeals of Virginia came back and said, “If you are what they call a lower wage,” – again, anyone making $78,000 or less – “If you're a lower wage employee, you cannot be subject to a non-solicitation of employees.”

Seth Berenzweig

A non-compete or non-solicitation.

Declan Leonard

Non-compete or a non-solicitation of employees. And that means really on its face at a lower a lower wage employee can go directly to your competitor. There's no non-compete. And now they can get on the phone and start calling up your employees and soliciting them over. There's nothing that would prevent them from doing so.

Seth Berenzweig

And this, Virginia used to be the Wild West. I mean, the Virginia is a very important jurisdiction, of course, because in the GovCon space, either by way of headquarters or otherwise, we have a lot of GovCon presence here in our backyard in Northern Virginia. And it used to be the Wild West. They didn't care about misclassification of employees.

They didn't care about non-competes.

Declan Leonard

Yeah, yeah. It really had no discrimination laws other than the federal ones coming into play.

Seth Berenzweig

Yeah. Totally different.

Declan Leonard

Yeah.

Joe Young

So, $78,000 is this threshold that they set. That's talking about base salary. So, Seth, what about other types of compensation? Commissions, bonuses… Does that come into the calculation of what employees we would be classified under this?

Seth Berenzweig

You would think that it would. But with some explanation, generally it does not. So, if you are getting a bonus/commission that is less than half of your base, then that will generally not be considered within or subject for the $78,000 cap. So, someone can be making $75,000, or let's just make the numbers really simple.

Let's say that they make $70,000 on a base, and then they make a $30,000 bonus. Their compensation is $100,000. You would think that they would be outside of the scope of this. No, the court says, in that instance, that person still cannot be subject to a non-compete or non-solicit. If it is over half of the base, then that's a different story.

If the numbers get way out of whack and the person makes 70, but the bonus is 140, then then that's a different story. It will be treated otherwise. But that's just another dimension that shows how this is such a real significant change in terms of how these rules are now getting applied at Virginia.

Declan Leonard

And I think it's still even playing out. I mean, I think that's the absolute correct analysis that Seth just said. But I could see a judge – because this is relatively new. Again, the prohibition on non-competes for lower wage workers just was passed in 2025. Now we have this added wrinkle of now they cannot be prohibited from soliciting employees.

That's just two weeks old. And the language that they use is they say the earnings have to be the predominant part of your pay. And so, Seth was right, if you're receiving particularly a discretionary bonus, I think that that might even play more into it. If you have an absolute commission plan that is rock solid, that you can do the math prospectively and know exactly what you're going to make, that might sway a judge. So, I think companies are going to really just have to take another look at the pay practices and see. They can't just look at base salary anymore. Are our employees over that 78 or are they not?

Seth Berenzweig

And now companies will have to see with these changes that that have been very recent whether they'll probably want to go back and take a look at their agreements because now the rules of the road have changed.

Declan Leonard

Yeah. We'll hit that later. That question.

Joe Young

So with that said, are lower wage employees in Virginia also allowed to solicit customers away from a former employer?

Declan Leonard

So that was the interesting wrinkle. And so, a little bit of solace, a little bit of consolation to companies out there who are, again, trying to protect... I mean, you're coming off of 2025 where you're just trying to protect the existence of your company. Now you're trying to protect your workforce and your customers. The court did say that if you have a non-solicitation of customers, that is okay to impose on what they call a low-wage employee, somebody making under 75.

And of course, by extension anybody making over 75 is subject to all of these restrictions. Those are fair game. But yes, you can impose a non-solicitation of customers on a lower wage employee. But you got to be careful in what that non-solicitation of customers looks like. Because oftentimes when I see these it says, “You're not allowed to solicit. You're not allowed to service. You're not allowed to provide services for…” And they sort of take a non-solicit and then broaden it so that at the end of the day it becomes a little bit more of a non-compete that would not pass muster. It strictly has to be, “Did the low wage ex-employee solicit that customer to come over?” And you can imagine how that is an evidentiary nightmare in many ways. Because how do you prove who solicited whom? And there's – shocker to know that there's oftentimes some coordination there to create a paper trail that looks like this was not a solicitation.

Joe Young

And so, this scenario. We're all on LinkedIn. Everybody's posting their job changes on LinkedIn. Everybody, even not just immediate but three times removed, can know that, “Hey, somebody left that job.” There could be a customer in that situation if an employee leaves, posted on LinkedIn, and a competing company kind of reaches out to them, to the departing employees, is that okay? How would that be interpreted?

Declan Leonard

It's interesting because LinkedIn has been involved in litigation as to whether or not LinkedIn is solicition. And I think, under the question that you just asked, where it's the company that goes on LinkedIn, notices this employee has now jumped ship to a competitor and reaches out. I don't think that that solicitation.

Now, what often happens on LinkedIn as you get these direct messages. That creates a paper trail. “Hey, I'm over here now. Thought you'd like to know.” The devil's in the details on that communication. How far did you go? “Let's have coffee. Let's have lunch.” You get a little bit closer to actual solicitation.

Joe Young

We had a question came in that led us right into one of the topics we were going to discuss here. And it gets down to situs: Where is a company? Where is the employee? So, you know, this is in Virginia, you got a Virginia company headquartered in Virginia, but they've got workforce everywhere.

I know I have a client headquartered here. They're in Huntsville, Alabama. They're folks down there. If you're listening, you know who I'm talking about. They listen all the time. So, what's that scenario? What's what? What dictates the rules of the road there?

Seth Berenzweig

So, let's break it into a scenario where, let's say the company is headquartered in Huntsville, but they have an employee in Virginia. Huntsville doesn't follow this new change. Virginia does. What law applies? The law that applies in that scenario is the law of Virginia, because you apply the employment law based upon where the employee is located. Stated differently, a company cannot contract its way out of the employment laws of the state where the employee is located. They're just not allowed to do that. So, in that situation, for example, of a company in Huntsville, if they have employees in Virginia, then the Virginia regulations, the registry, the restrictions would apply to the employees working in Virginia.

Just another couple of quick related notes. There are some states that are going to say that if there is a company in your state, regardless of where they're located, they have to follow the state where that legislature wanted to control. Massachusetts, they're looking at a bill right now to extend its states employment laws that cover all employees, of all companies that are based in Massachusetts, regardless of where they're actually located.

There are some jurisdictions that are similar to Virginia in terms of adopting this kind of a change. This is a shocker. California falls within that kind of category. So it's going to be important to know where your employees are located and then to have that foot with what the provisions are with regard to what those local employment law provisions are.

Joe Young

So, to be clear though, in the scenario we went through, Huntsville-based company, employee here. Flip it. Virginia-based company, employees in Huntsville, does the law, since the company’s headquartered in Virginia, does that apply to employees in Alabama, or is it based on where the employees are?

Declan Leonard

So, if the company has an employment agreement that encapsulates like Virginia choice of law, Virginia venue, and everything like that, they in essence impose that on all of their employees, no matter what state they're in.

Joe Young

Okay. So, it carries both.

Declan Leonard

Which is typical. Yeah. Now, in terms of whether or not if, in the absence of an agreement – now there has to be an agreement because that's what we're talking about here. We're talking about a written-in solicitation agreement. But you know what? There's no bright line rule here. Sometimes, if you're headquartered in… This and the question of where a company is headquartered nowadays is really an open question.

Sometimes people will have a WeWork space where it's just a shared conference room. Is that really a headquarters? So, I've had situations lately where I have had trouble finding out exactly or ascertaining exactly where my client is headquartered for purposes of this. So, it's a common thing that we talked about on the Round-Up so much, the patchworks of states HR. It makes their lives definitely much tougher to do this state-by-state analysis.

Joe Young

We do have another question here. Let's address that. So, what happens if you sign a non-compete and your company gets bought by another company? Does this non-compete still stand?

Declan Leonard

This is a this is a great question. Normally, the restrictive covenant is going to have an assignability clause that says this can be assigned to any successors and assigns. If somebody buys it, they're basically considered to be a successor. I've always had a problem with this, though, and I've always thought I've never seen this truly litigated in the courts because – and this is going to be a ludicrous example – but what if you're a mom-and-pop shop and the definition of company…

Because usually when you see these things that says “You can't compete with company, you can't solicit companies, clients or whatever.” Well, let's say a mom-and-pop shop is bought by Google. Just a behemoth company. They do that. Does Google now become – because that that old company has now disappeared. Does Google now become inserted everywhere it says company and that's the logical way you would have to read it because the old company has gone away? I just don't think a court is going to go down that road. So, that would be the legal challenge I would make against that.

Seth Berenzweig

So, then, in other words, if you have looked to the contract because of the contract says this is assignable. Then yes it will be, it can be assignable. And then in the underlying transactional documents, they'll assign it along with all the other material assets. If it doesn't say it's assignable, and you end up with an unbalanced situation where you then have a new company saying, “Oh, we're just going to try to step in the shoes.” If it's not contemplated by the underlying contract, that's a very different conclusion.

Declan Leonard

Yeah. And exactly. And we see so much now with the private equity activity in purchasing government contractors. I mean, so much activity. Private equity is like the umbrella company. Then they've got all of their other companies under it. So, I've just always wondered, to me, what you really need to do as the new employer, as the acquirer, is make them sign a new one.

But you would be surprised at how often that falls through the cracks. And I'm always amazed by it because I'm looking at a restrictive covenant. I'm like, “Wait, you're working for this company? But this is a totally different company.” They're like, “Yeah, but it just came over in the deal.” And it's like, “Wow, you didn't button that one up and signed a new one,” which they should have done.

Joe Young

Well, I think too, you see in those transactions, everybody's like, “Well, who are the highly compensated people that we need to get these agreements in place for that we're worried about leaving. We're worried about competing.”

Seth Berenzweig

Yeah, they probably took care of them.

Joe Young

Of the under $78,000 who are doing work, who can be really detrimental if they just flip next door… And as we know, we have government contractors on sites that are doing the same work as people who are working for different companies. Yeah, they're talking, they're like, “We're doing the same thing every day. You're making what? Oh. I’ll flip over.”

Declan Leonard

You raise a good point, Joe. Because people think about that.

People think sometimes the higher the salary, the higher the title or whatever, the more you're a threat to a company. But when you think about government contracting – and you just raised a great point. You set the scenario that it's oftentimes those people and sometimes they're entry-level people who are sitting onsite doing work with other people.

When they leave and go to a competitor, they have way more credibility than the higher ups that are executives.

Seth Berenzweig

They’re the first ones to get poached.

Declan Leonard

They're saying, “Hey, dude, it's great over here, come over here. We've got flex time off. We do all this stuff.”

Seth Berenzweig

Swap your badge and you're good.

Declan Leonard

You're going to go over there. You're going to be solicited way more effectively by somebody who potentially is entry level, first year, second year, than necessarily the high level who they know there's always ulterior motives and stuff like that.

Joe Young

That leads us into the next question we have: What are some of the steps you should be taking, the things you should be thinking about to protect yourselves from these class of your workers that you have going forward knowing that this this is out there?

Declan Leonard

Companies have to be very strategic. First of all, they need to know about it. I mean, thankfully, we've got an audience of thousands that are listening today that are…

Joe Young

Globally. Just hit the wires.

Declan Leonard

And they're all saying to themselves, “What the heck is Virginia?”

But, what was I saying? Oh, but they just got to be very strategic about it. And the first thing, is they have to know about it and then to make decisions we talked earlier about. Seth was talking about how do you even determine what is a low wage employee? I don't like that moniker that they're giving to that because I think that's not really a fair characterization, but like when you're designing your pay strategies, I mean, let's just say it right out. Make sure their pay is over 78. Yeah.

Joe Young

Don’t pay anybody 77, even if you cut back.

Declan Leonard

Even if you play like the Price is Right and you go $78,001, get over the 78,000. And by the way, your company would say, “Yeah, but that's going to cost me more money.” Not necessarily, because if you're giving away discretionary bonuses, that may, as we talked about earlier, that may under the law, not bring you above the 78,000 threshold. Take a little bit of that money, add it to the base salary, and then you're, at the end of the day, your total comp is going to be the same.

Joe Young

Is there anything in the law that has marked that to cost of living adjustment or anything? Is it like $78,000 until… So it could be $78,000 10 years from now?

Declan Leonard

So yes. Great point. It does. It gets adjusted. And our great marketing team here, I think, just posted on that. Right, Rachel? Where it just got raised to 78. I forget what it was before. It could have been in the low 70s, high 60s. It increases annually. Yes. Just posted. She's great.

We got a great team here. But yeah, if you're in question because it does go up. And so next time it's going to jump into the 80s and, you know, I mean, that's real money. I mean, soon it could you could see a time when it eclipses six figures.

Seth Berenzweig

I would also just point out that this also I think changes the M&A game, because when you're doing due diligence and you're acquiring a company, and you look in what we call the data room where they have the schedule of employees, schedule of salaries, you're going to need to lift up the hood and take a look at that.

Because you have to see how those numbers foot with each other in light of these changes. Because you may find that people who supposedly have restrictions that you thought have restrictions actually are not going to have those restrictions anymore.

Declan Leonard

True, true. Yeah. You do have to look at these because there's still three things you can do for like somebody under 78,000 in Virginia, they're still three things. You have to have a lock solid non-solicitation of customers, okay? And you got to make sure that you've drafted it the right way. I said earlier if that's a non-solicit that says you're not going to solicit or otherwise perform work for, you've now screwed that over because that's not going to be enforceable in Virginia because that's turned it into essentially a non-compete.

So, take a look at it. Make sure it's no broader than a non-solicitation. You need to have very strong non-disclosure of confidential information and trade secrets. And when you're defining that you should really define that as salary information, any kind of employment benefits that are not generally known, not otherwise posted in these job postings.

Because once you post it, it really no longer is confidential because you're putting it out to the public. So, make sure that you really look at your confidentiality provision because that employee that leaves and is looking to solicit, they potentially could be using confidential information such as salary information to lure those people over.

That then becomes illegal because that then becomes a violation not of a non-solicitation of employees but of a confidentiality provision. And then the final thing is, and actually, in the case that that that we were talking about two weeks ago, the low wage employee actually started the business and started luring people away before they ever even left the company. And that is a breach of fiduciary duty. And so that is something that you can absolutely bind them to. I would recommend that companies actually, because, it's a common law breach of fiduciary duty. So even in the absence of having a written agreement, you can never breach your fiduciary duty of loyalty, which basically means, “Hey, when you're drawing a paycheck, be loyal to us. Don't try to screw us. Don't try to compete against us.”

I would put that in the employment agreement, almost like codifying it. I would make sure that it's in there. And not only that, but then if there's a violation, you maybe get attorney's fees under the agreement, maybe you get additional things that you might not get under common law.

Joe Young

And Seth, maybe to wrap up here, in addition to some of the language that that Declan is focusing on inside these agreements, you need to be specific about other provisions inside the employment agreement that also you should be keep in mind. Maybe you want to button up or add to those?

Seth Berenzweig

When we're talking about putting the refined touches on unemployment agreements, there are a couple or things just to tag, at the end here that are definitely worthy of consideration. The first would be a venue selection clause. Let's say, for example, if you are in Northern Virginia, you want to make sure that you have an agreement that says that all disputes are resolved in either the Circuit court of Fairfax County, Virginia, or the Eastern District of Virginia in Alexandria, in federal court. We have some of the best managed, fastest moving pro-business courts here in Virginia. To not put in a venue selection clause is just low hanging fruit. We also, as a firm, do not like arbitration clauses. We counsel our clients, do not put it in an arbitration clause. It's kind of an old wives tale to see how arbitration makes it easier and faster and is cheaper. Yeah. Sorry. No. Arbitration is not predictable. It is not appealable, 99 times out of 100.

And when you get an arbitrator, you get what you get. You don't get upset.

Declan Leonard

And for all our pending arbitrations going on right now, those are the exception to the norm. We love you people.

Seth Berenzweig

Oh, of course, that's… Well… But those, by and large, are based upon arbitration clauses in contracts that we inherited. It wasn't like “Go arbitration!” And then the last thing, of course, is prevailing party attorneys fees clauses. That is something that is really a “be on your best behavior” clause, because if there is a prevailing party attorney's fees clause in the contract, the other side and the other side's attorney will see that if they just try to play games, and if your company in that battle wins and they have to pay your attorney's fees. That's really strong. So those are some other considerations to keep in mind.

Declan Leonard

It really changes a dynamic in the strategy because if you're the company and you're like, “You know what? Yeah they're doing this. But it's not really costing me too much money. I might be losing $50,000.” You start to weigh that against the attorney's fees. And you say, “You know what? It's just not worth it.” But if you think that you can also get attorney's fees, then that debt becomes the consideration on top of it.

Joe Young

Wonderful. Well, gentlemen, always a pleasure. We're going to get everybody out of here on time. Wow. Which means, for all our U.S. Olympic fans out there, there's still time to get – it should be maybe just the end of the first period of the U.S. women's game right now. So, you know, don't tell your boss, but you can have it on in the background and be patriotic. The men's game is tomorrow afternoon. Any other, final weekend Olympic stuff you guys are interested in?

Seth Berenzweig

What's your favorite?

Declan Leonard

I've always thought that they should combine some of these sports in the summer and the winter. Like they should have synchronized cold plunge diving. That would be good. Well, you know, if you could come up with all these, like, really fun ones.

Joe Young

I love that. The plunge. The Fins and the Norwegians would just continue to win everything. They cold plunge everything.

Seth Berenzweig

And maybe you could add a little bit of a drinking beer game before they go in the ice.

Declan Leonard

That would be great. I guarantee there's people out there that watch at home. Oh, of course there's drink-along games.

Joe Young

The U.S. would be the favorites of the polar bear plunge of the referee.

Seth Berenzweig

For all you know, the Canadians probably already have prior experience.

Joe Young

Yeah, that that should be us or the Canadians. Oh, well, again, thank you everyone for joining us. A couple scheduling notes for our listeners out there: Next month's episode in March, we are going to be moving back to the fourth week of March. So, we're going to be on Thursday, March 26th. And then I know this is going to upset everybody. We're not going to have an episode in April of this year because of some scheduling conflicts. It doesn’t have anything to do with me being invited to the Masters this year. I checked the mail all January.

Seth Berenzweig

Is that why we saw protesters downstairs?

Joe Young

Yes. My invitation to the Masters did not come again this year, but I have another conflict for April. But we'll look forward to being back here, in March. And hopefully will be a little warmer, be closer to Spring. We'll be looking forward to that. But everybody, again, thank you for joining us. Hope this was helpful. And we look forward to seeing you again soon.