Over the past ten years, as a matter of public policy, numerous states and the federal government have attempted to limit the enforceability of noncompete agreements.
A noncompete agreement prohibits a worker from competing against the employer either during employment or after the employment ends.
Noncompete agreements are often intensely important to our small business clients.
This article will provide an overview of the present status of noncompete agreements both under federal law and under state law. Please note that this article focuses on noncompete agreements as between a business and employee—noncompete agreements between the buyer of a business and its former owner are subject to different legal standards.
FEDERAL LAW
In January 2024, the United States Federal Trade Commission (“FTC”) made headlines when it announced a rule that would substantially ban all noncompete agreements nationwide.
Various legal challenges to the FTC’s proposed rule rapidly ensued.
As of the writing of this article, the FTC proposed rule remains subject to a nationwide injunction, meaning that there is no federal ban or limitation on noncompete agreements.
The current administration is reviewing whether to pursue enforcement of the FTC’s proposed rule, refine the scope of the rule, or abandon the rule entirely.
MARYLAND
The Maryland legislature has taken somewhat measured steps at limiting noncompete agreements, focusing on the wages and profession of the employee.
Noncompete agreements are banned under state law for three classes of employees:
- Employees making annualized compensation less than 150% of the state minimum wage (less than $49,920.00/year in 2025);
- Certain licensed veterinary practitioners and technicians; and
- Beginning July 1, 2025, certain licensed healthcare providers who provide healthcare services directly to patients and who earn $350,000.00 or less in total annual compensation.
DISTRICT OF COLUMBIA
The District of Columbia legislature has more broadly prohibited noncompete agreements.
Since 2022, the District of Columbia legislature has prohibited noncompete agreements for most workers earning $154,200.00 or less.
In addition, noncompetes are prohibited for certain medical specialists earning $257,000.00 or less.
Both income thresholds are increased annually on January 1 to take into account interim inflation.
Noncompete agreements (or noncompete provisions in broader agreements) that violate the statute are unenforceable in court. Moreover, employers who request that exempt employees enter into noncompete agreements or who attempt to enforce prohibited noncompete agreements, are subject to District of Columbia fines and penalties.
VIRGINIA
Recently, Virginia has significantly broadened the scope of employees who cannot be bound to a noncompete agreement.
In 2020, the Virginia legislature initially prohibited non-compete provisions entered into by “low-wage employees” on or after July 1, 2020, defined in 2025 as employees who make less than $1,463.10 per week or $76,081.00 per year.
On March 24, 2025, Governor Glenn Youngkin signed legislation that expands the definition of “low-wage employees” to include anyone who is eligible for overtime compensation under federal law for hours worked in excess of 40 per week, regardless of wages earned. As a result, effective July 1, 2025, employers will be prohibited from enforcing noncompete agreements against non-exempt employees under the federal Fair Labor Standards Act (the “FLSA”).
Employers who violate the Virginia noncompete statute face civil penalties of as much as $10,000 per violation. In addition, the Virginia statute provides employees with the right to file a private suit to invalidate an unlawful noncompete agreement, and to recover liquidated damages, lost wages, other compensation (including benefits), court costs, and attorneys’ fees if they are successful.
REGARDLESS OF YOUR JURISDICTION, THE TEST ISN’T ONLY WAGES
Across the DMV, when advising business owners on noncompete agreements, the applicable compensation threshold is only the first test.
Even for facially valid noncompete agreements, courts in the District, Maryland, and Virginia will carefully scrutinize noncompete provisions and their application in particular circumstances to determine whether they are ultimately enforceable. Although each jurisdiction differs somewhat in its analysis, courts in all three jurisdictions generally focus on whether the restrictions are (1) reasonable in duration and scope AND (2) serve to protect the legitimate business interests of the employer. If a noncompetition agreement is found to be overly broad, courts may limit its enforceability or determine that the agreement is unenforceable altogether.
Employers with workers who may be protected under applicable laws should review any existing agreements containing noncompete provisions with legal counsel to ensure that they are enforceable. The attorneys at Bulman, Dunie, Burke, & Feld can assist both employers and employees in determining their rights concerning non-competition agreements, non-solicitation provisions, and other restrictive covenants. Contact attorney Tim Canney, chair of the firm’s business and tax practice, at tcanney@bulmandunie.com or (301) 656-1177 x331.
