For any employer with workers in more than one state, a single, standard employment agreement is now a liability. As state non-compete laws continue to evolve, employers must navigate a growing number of requirements affecting non-compete agreements, other restrictive covenants, and broader multi-state employer compliance obligations. Although the Federal Trade Commission (FTC) failed and then aborted their attempt to ban all non-competes nationally, the states have moved into the space the FTC left. One tracker counted 101 non-compete bills pending in 34 states by the end of March 2026. By late June, another tracker counted 16 new laws enacted this year. The changes go beyond the familiar question of whether a non-compete is "reasonable." Legislatures are putting conditions on enforcement and carving out entire professions. They're also reaching past non-competes to other clauses that make it costly for an employee to leave.

The Lines Are Shifting: Key State Non-Compete Law Developments Employers Should Watch

Virginia SB 170: Non-Competes Now Require Severance

Virginia's Senate Bill 170 is the most notable new approach this year, in today’s state non-compete laws landscape and reflects a broader trend toward regulation of non-compete agreements. As of July 1, a Virginia non-compete is unenforceable if the employer fires the employee without cause and doesn't provide severance or another monetary payment.

Three features deserve attention:

• It applies at every wage level. Virginia already banned non-competes for "low-wage employees." That group includes anyone earning less than the state's average weekly wage ($1,507.01 per week, or about $78,365 a year, in 2026) and all non-exempt employees. SB 170 applies the severance condition to everyone else, including senior executives.
• The payment must be disclosed up front. The severance or other payment has to be disclosed when the non-compete is signed. Promising it at termination isn't enough.
• Key terms are undefined. The statute doesn't define "cause," "severance benefits" or "other monetary payment," and it sets no minimum amount. Courts will fill those gaps. In the meantime, employers should define "cause" carefully in the agreement.

Penalties: The state can impose civil penalties of up to $10,000 per violation. Courts can void agreements that don't comply and award liquidated damages, lost pay and attorneys' fees. The law applies only to agreements signed, amended or renewed on or after July 1, 2026.

Virginia SB 128: Health Care Non-Compete Ban

Virginia also passed Senate Bill 128, which bans non-competes for health care professionals licensed by the state's boards of Medicine, Nursing, Counseling, Optometry, Psychology and Social Work. The exceptions are revealing. The ban doesn't cover:

• Confidentiality agreements
• Narrowly drawn customer non-solicitation clauses
• Non-competes tied to the sale of a business
• Provisions requiring repayment of recruiting, relocation or training costs if the professional leaves within five years

That last exception matters because other states are targeting exactly those repayment provisions.

Washington: Near-Total Ban Starting in 2027

Not to be outdone, Washington enacted a near-total ban effective June 30, 2027. On that date, all non-competes become void no matter when they are signed. By October 1, 2027, employers must make reasonable efforts to notify current and former employees and independent contractors whose non-competes are still in effect that those agreements are void.

Tennessee: New $70,000 Income Threshold

Another shifting dynamic is in Tennessee where the legislature added a $70,000 income threshold effective July 1, 2026. In short, non-competes for employees who earn $70,000 or less will not be enforced. 

How Do Non-Compete Laws Differ by State?

Virginia, Washington, and Tennessee are part of a wider trend as non-compete laws by state become increasingly varied. States now fall into roughly four groups:

Although many states remain open to non-compete enforcement, such as Ohio, Florida, and Texas, employers should not assume they are immune. For example, early-2026 bill trackers listed Ohio proposals for both a full ban and health care-specific limits.

Beyond Non-Competes: Stay-or-Pay Provisions and Workplace Mobility Laws

The biggest shift may be that legislatures now look past the non-compete itself. Lawmakers are targeting stay-or-pay provisions and training repayment agreement provisions (TRAPs) as part of a broader effort to advance workforce mobility laws and remove barriers to employee movement.

What Are Stay-or-Pay Provisions and TRAPs?

"Stay-or-pay" provisions require a departing worker to repay money if they leave before a set date. Examples include training costs, sign-on or retention bonuses, relocation expenses and tuition.

The FTC's 2024 rule would have reached some of these provisions. With that rule gone, states are acting on their own.

• California. AB 692 will take effect January 1, 2027. It broadly bars employers from requiring workers to pay a debt, fee or penalty because their employment ends. It covers training costs, retention bonuses, relocation costs, and immigration-related expenses, with narrow exceptions such as qualifying tuition repayment agreements. Workers can sue for damages, injunctive relief and attorneys' fees.
• New York. The Trapped at Work Act was signed December 19, 2025. It bans "employment promissory notes," meaning any provision requiring an employee to pay money for leaving before a stated time. Amendments signed February 13, 2026, narrowed and delayed the law for one year. It now covers only employees, not independent contractors, interns, or volunteers. It carves out repayment of tuition and related costs for certain "transferable credentials." 
• Colorado and Connecticut both regulate this area, but Connecticut has recently expanded its restrictions. While Connecticut has long banned employment promissory notes for employers with 26 or more employees, effective October 1, 2026, that ban applies to all Connecticut employers regardless of size.

The underlying policy is the same across these laws. Legislators increasingly treat any contract term that makes leaving expensive as a restraint on worker mobility, whatever the term is called.

What Should Employers and Their Counsel Should Do Now?

1. Inventory by state where employees work. Remote work means the governing law often is not the state where the company is headquartered. Map every employee subject to a restrictive covenant or repayment obligation to the state where that employee actually works.
2. Retire the single national template. Use a core agreement with state-specific addenda. A Virginia addendum should disclose the severance or payment that supports the non-compete. A California, Connecticut or New York addendum should remove or restructure repayment clauses.
3. Rethink severance as a design tool. Under laws like Virginia's, severance is now part of what makes a non-compete enforceable. Employers should decide in advance which roles justify a non-compete worth paying for. Roles that do not warrant severance should rely on confidentiality and non-solicitation protections instead.
4. Audit repayment and clawback provisions separately. Sign-on bonuses, tuition assistance and relocation packages often live in offer letters and benefit policies that nobody treats as restrictive covenants. Review those documents too.
5. Watch "amend or renew" triggers. Virginia's law and California's AB 692 both reach existing agreements that are later amended or renewed. Before re-signing covenants at promotion or in annual acknowledgments, confirm that the new version complies with current law.
6. Lean on trade secret and confidentiality protections. Even Virginia's health care ban leaves confidentiality agreements and narrowly drawn customer non-solicitation clauses in place. Well-drafted confidentiality protections, along with the practical steps needed to keep trade secrets secret, remain the most portable protection across states.

How Employers Can Adapt to Changing Non-Compete Laws by State

The absence of a federal non-compete rule has not simplified this area. It has multiplied the rules. A non-compete that is enforceable in one state may be void in the next, and a repayment clause that is ordinary in one state can lead to a lawsuit in another. Employers who treat restrictive covenants as a routine form of document will fare poorly if trying to enforce the terms. Those who review them state by state, and build severance and payment terms deliberately, will be in a much stronger position.

Managing Non-Compete Risk Across State Lines

The rules governing employee mobility continue to change. Whether you’re reviewing non-compete agreements, updating restrictive covenants, or managing a multi-state workforce, Ice Miller can help you navigate and stay ahead of evolving legal requirements. Contact a member of our team advising on employment agreements, or any member of our Workplace Solutions Group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.