Non-Competes for Federal Contractors: A Northern Virginia Attorney’s Guide for Workers and Contractors in Virginia, Maryland, and DC

By Anthony I. Shin, Esq., Shin Law Office

1. Why Non-Competes in Federal Contracting Are Different

Non-compete enforceability in any setting turns on whether the employer has a legitimate, protectable business interest, whether the restriction is reasonable in scope (geography, duration, activity), and whether it imposes undue hardship on the employee or harm on the public. State law sets the framework. The DMV jurisdictions have moved aggressively in the past five years to limit non-compete enforceability, particularly for lower-wage workers and (in DC) for most workers regardless of wage.

Federal contracting adds four additional considerations to that general framework. First, much of the federal contractor workforce is cleared, and cleared worker mobility is an industry norm. The same engineers, analysts, program managers, and specialists circulate among the major primes (and across the federal customer and contractor sides) throughout their careers. Aggressive non-competes against cleared workers often face an uphill battle on grounds of undue hardship and public interest, because the cleared workforce is itself a national security resource. Second, much of the work performed by federal contractor employees is tied to specific federal contracts that end (through completion or through loss in recompete) at predictable points. A non-compete that would protect a private-sector employer’s customer relationships often lacks an analog in a contract-bounded federal contracting role. The relevant protectable interest is harder to articulate. Third, the Service Contract Act Section 4(c) successor obligation means that workers who transition from an incumbent contractor to a winning recompete contractor often do so under regulatory protection rather than as a result of a competitive move that a non-compete would normally restrict. Fourth, the cleared workforce often operates under non-disclosure obligations imposed by clearance and by program security requirements that overlap with the protectable interests an employer’s non-compete might try to capture.

The result is that federal contractor non-competes are frequently challenged, often successfully on the worker’s side. The trade-off is that contractors who do not deploy non-competes (or related restrictions) carefully can leave their actual protectable interests (genuine trade secrets, customer goodwill in a non-contract-bounded sense, specific program knowledge that has value beyond the single contract) exposed. The right approach is usually layered: tight non-disclosure protection for actual trade secrets and CUI, non-solicit provisions tied to real customer relationships, and the use of non-competes only where state law allows and the protectable interest is concrete.

This guide walks through each jurisdiction’s framework, then turns to the FTC rule that briefly threatened to upend the whole field, the Defend Trade Secrets Act framework that operates alongside the non-compete framework, the alternatives that often work better than traditional non-competes, the federal contractor-specific factors that shape the analysis, and the litigation patterns when these agreements get tested.

2. Virginia Non-Compete Framework

Virginia approaches non-competes through a combination of the Bowman v. State Bank of Keysville common-law framework for reasonableness review and the 2020 statutory prohibition on non-competes for low-wage employees codified at Va. Code §40.1-28.7:7.

Common law reasonableness

Virginia courts review non-competes under a three-factor reasonableness test inherited from Roanoke Engineering Sales Co. v. Rosenbaum, 223 Va. 548 (1982), and refined through decades of subsequent cases. The restriction must be no broader than necessary to protect the employer’s legitimate business interest, must not unduly burden the employee’s ability to earn a living, and must not violate public policy. Courts assess geographic scope, duration, and the range of restricted activities against the employer’s specific business interest in the specific case. Virginia courts have generally declined to “blue-pencil” overbroad non-competes (rewriting them to a defensible scope), so an overbroad agreement often falls in full rather than being narrowed and enforced.

The 2020 low-wage prohibition

Va. Code §40.1-28.7:7 (effective July 1, 2020) prohibits employers from entering into, enforcing, or threatening to enforce a non-compete with a “low-wage employee.” A low-wage employee is defined as an employee whose average weekly earnings are less than the Commonwealth’s average weekly wage, as determined under Va. Code §65.2-500(B). The Virginia Employment Commission publishes the figure annually; the threshold sits in the high $1,400s per week as of 2025, roughly corresponding to an annual salary in the high $70,000s. The statute also covers independent contractors paid at hourly rates less than the median hourly wage for all occupations in Virginia. The threshold is updated annually.

Carve-outs

The Virginia low-wage statute carves out employees whose earnings are derived in whole or predominantly from sales commissions, incentives, or bonuses. The statute also clarifies that it does not prohibit confidentiality agreements protecting trade secrets or proprietary information, or non-solicit provisions concerning customers obtained during employment.

Remedies

A low-wage employee subject to a prohibited non-compete may sue the employer within two years of (1) the date the contract was signed, (2) the date the employee learned of the contract, (3) the date the employment relationship was terminated, or (4) the date the employer took action to enforce the contract, whichever is latest. Available remedies include actual damages, $10,000 in statutory damages (or such other amount as is greater), lost compensation, attorney fees, and costs. Employers must also conspicuously post the statute or a summary in the workplace; failure to post can support a civil penalty up to $1,000.

2024 amendment

Virginia amended the statute effective July 1, 2024, to clarify that the low-wage employee category includes anyone who is paid on an hourly basis, regardless of total compensation. The 2024 amendment effectively voided non-competes against any hourly worker in Virginia. Salaried workers earning above the low-wage threshold remain subject to non-competes under the common law reasonableness framework.

3. Maryland Non-Compete Framework

Maryland approaches non-competes through a combination of common-law reasonableness review and a statutory wage threshold prohibition that has expanded significantly through 2024 and 2025 amendments.

Common law reasonableness

Maryland courts apply a three-part reasonableness test from Becker v. Bailey, 268 Md. 93 (1973), and its progeny: the restraint must be limited in scope and duration as necessary to protect the employer’s legitimate interest, must not impose undue hardship on the employee, and must not violate public policy. Unlike Virginia, Maryland courts will sometimes blue-pencil overbroad non-competes to a defensible scope rather than voiding them entirely.

The 2019 wage threshold prohibition

Maryland’s original Noncompete and Conflict of Interest Clauses statute (Md. Code Ann., Lab. & Empl. §3-716, effective October 1, 2019) voided non-competes for employees earning $15.00 per hour or less, or earning $31,200 per year or less. The 2019 framework was narrow.

2024 healthcare amendments

The 2024 amendments (effective July 1, 2025) significantly expanded §3-716’s scope. Non-competes against licensed health care professionals earning $350,000 or less per year are now void. The amendments respond to physician and licensed health care worker mobility concerns in the wake of consolidation in the health care market.

2025 veterinary and broader expansion

Maryland’s 2025 amendments further expanded coverage to include licensed veterinary professionals and added structural restrictions on non-competes used by for-profit healthcare systems. Maryland’s wage threshold for ordinary employees was also raised to 150 percent of the state minimum wage (roughly $22.50 per hour in 2025 terms, or approximately $46,800 annually). Federal contractor employees in Maryland generally fall above these thresholds, but the trend line is clearly toward broader prohibition.

Carve-outs and remedies

Maryland’s prohibition does not affect confidentiality and non-disclosure agreements protecting trade secrets and proprietary information, or non-solicit provisions concerning customers obtained through employment. Maryland’s statute does not include the per-violation statutory damages remedy that Virginia’s does, relying instead on common law contract and tort remedies for void provisions.

4. DC Non-Compete Framework

The District of Columbia has moved further than Virginia or Maryland in restricting non-competes. After several rounds of legislative activity, the current framework is set by the Non-Compete Clarification Amendment Act of 2022 (D.C. Law 24-175, effective October 1, 2022), codified at D.C. Code §32-581.01 et seq.

Broad prohibition with limited carve-outs

DC prohibits employers from requiring or requesting that a DC employee execute or comply with a non-compete provision. The default rule is that non-competes against DC employees are void and unenforceable. The exceptions are narrow: highly compensated employees (defined as those earning at least $150,000 in total annual compensation, or $250,000 for medical specialists), where specific notice and content requirements are met. The thresholds are subject to annual inflation adjustment.

Notice requirements

Even for highly compensated employees, the employer must provide written notice of the non-compete proposed terms at least 14 days before the employee is required to execute the agreement (whether at the start of employment or during employment). The notice must include specified content. Failure to provide proper notice voids the agreement.

Anti-moonlighting carve-out

DC explicitly allows employers to restrict an employee from accepting other employment that would create an actual conflict of interest, interfere with the employee’s ability to perform the work, or otherwise disqualify the employee under the employer’s reasonable conflicts-of-interest policies. This anti-moonlighting carve-out preserves the kind of conflict management that legitimate employers commonly need without authorizing broader non-compete provisions.

Trade secret protection preserved

The DC framework explicitly does not affect agreements that prohibit disclosure or misappropriation of confidential, proprietary, or trade secret information. Non-disclosure agreements, non-solicit provisions, and trade secret protection agreements remain enforceable on their own terms.

Remedies

Employees subject to prohibited non-competes can recover relief through DC’s Office of the Attorney General, the DC Department of Employment Services, or through private right of action. Damages include compensatory damages (no less than $500 per violation), administrative penalties (up to $1,000 per violation), and attorney fees and costs.

5. The FTC Non-Compete Rule and Ryan LLC v. FTC

The Federal Trade Commission’s April 2024 final rule attempted to ban most non-competes nationwide. The Northern District of Texas set the rule aside in Ryan LLC v. FTC. The rule is not currently in effect. Understanding the failed FTC effort and its current status matters because the federal field could change again.

The April 2024 rule

The FTC issued a final rule on April 23, 2024 (16 C.F.R. §910), declaring it an unfair method of competition for employers to enter into or attempt to enforce non-competes with workers, with limited exceptions for senior executives’ existing agreements and for non-competes in connection with the bona fide sale of a business. The rule was scheduled to take effect September 4, 2024, and would have rendered virtually all worker non-competes nationwide void and unenforceable.

The legal challenges

Multiple lawsuits challenged the rule. The Northern District of Texas decision in Ryan LLC v. FTC, 716 F. Supp. 3d 583 (N.D. Tex. 2024), set the rule aside under the Administrative Procedure Act on grounds including that the FTC lacked statutory authority under the FTC Act to issue substantive competition rules. The court issued summary judgment on August 20, 2024, vacating the rule nationally and barring its enforcement.

Pending appeal

The FTC appealed the Ryan decision to the Fifth Circuit, but with the change in administration in January 2025, the FTC’s continued pursuit of the rule has been uncertain. The Fifth Circuit appeal remained pending as of this writing. A separate Eastern District of Pennsylvania decision in ATS Tree Services, LLC v. FTC reached the opposite conclusion (upholding the rule), but the Ryan vacatur applies nationally and the FTC has not enforced the rule.

Practical effect

The practical effect for federal contractor employers and employees in the DMV is that the federal non-compete prohibition is not currently operative. State law (Va. Code §40.1-28.7:7, Md. Code §3-716, D.C. Code §32-581.01 et seq.) controls. The state-level framework continues to tighten through legislative amendments, which is where most of the current enforcement attention sits.

6. Trade Secrets and the Defend Trade Secrets Act

Where non-competes are unavailable or impractical, trade secret protection often does the work that employers actually need. The Defend Trade Secrets Act of 2016 (18 U.S.C. §1836 et seq.) created a federal cause of action for trade secret misappropriation and operates alongside state trade secret law. For federal contractors, the DTSA framework is often the better fit than aggressive non-compete enforcement.

What counts as a trade secret

A trade secret under DTSA is information that the owner has taken reasonable measures to keep secret and that derives independent economic value from not being generally known to or readily ascertainable by other persons. The breadth is significant: technical information, business information, financial information, methods, processes, customer lists, and source code can all qualify if the secrecy and value elements are met. “Reasonable measures” require active protection: NDAs with employees and partners, access controls, marking of confidential materials, exit procedures that recover company property and reaffirm obligations, and security controls appropriate to the sensitivity of the information.

Misappropriation

DTSA prohibits acquisition of a trade secret by a person who knows or has reason to know that the trade secret was acquired by improper means, and the disclosure or use of a trade secret without consent by a person who acquired the trade secret by improper means or knew or had reason to know that the trade secret was acquired through breach of a duty to maintain secrecy. Improper means include theft, bribery, misrepresentation, breach of duty to maintain secrecy, and espionage. The framework reaches both the person who improperly acquires the trade secret and downstream recipients with knowledge.

Remedies

DTSA remedies include injunctive relief (with limits in the employment context: an injunction cannot prevent a person from entering into an employment relationship), damages for actual loss and unjust enrichment, reasonable royalties where actual loss cannot be proven, exemplary damages up to twice the compensatory amount for willful and malicious misappropriation, and attorney fees where the misappropriation was willful and malicious or where a claim was brought in bad faith.

Whistleblower immunity

18 U.S.C. §1833(b) provides federal immunity for whistleblowers who disclose trade secrets in confidence to a federal, state, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or in court filings that are filed under seal. Employers are required to give notice of this whistleblower immunity in agreements containing trade secret or confidentiality provisions. Failure to give notice limits available DTSA remedies against employees who otherwise would be entitled to immunity.

State trade secret law

Each of Virginia (Virginia Uniform Trade Secrets Act, Va. Code §59.1-336 et seq.), Maryland (Maryland Uniform Trade Secrets Act, Md. Code Ann., Comm. Law §11-1201 et seq.), and DC (DC Uniform Trade Secrets Act, D.C. Code §36-401 et seq.) has enacted a version of the Uniform Trade Secrets Act. Claims are typically pleaded under both DTSA and the applicable state UTSA. The substantive standards are similar but procedural and remedial details vary.

7. Non-Solicit, Non-Disclosure, and Garden Leave Alternatives

For most federal contractor employers, the realistic alternatives to traditional non-competes are non-solicit clauses, non-disclosure clauses, garden leave structures, and well-drafted confidentiality and assignment-of-inventions agreements. Each protects a specific interest more precisely than a broad non-compete.

Customer non-solicits

A customer non-solicit prohibits the departing employee from soliciting customers with whom the employee had a relationship during employment. Customer non-solicits remain broadly enforceable in Virginia, Maryland, and DC even where non-competes are restricted, because they protect a more concrete and limited interest. For federal contractors, the relevant “customer” is often the contracting officer or program manager at the federal customer agency. Non-solicits tied to specific federal customer relationships can be defensible where the relationship is genuine and the duration is reasonable.

Employee non-solicits

Employee non-solicits prohibit the departing employee from soliciting former colleagues to leave and join a competitor. Employee non-solicits face mixed treatment across jurisdictions. Virginia and Maryland generally enforce reasonable employee non-solicits. DC’s framework treats employee non-solicits with more skepticism but does not prohibit them outright.

Non-disclosure and confidentiality

Non-disclosure agreements protecting trade secrets, proprietary information, and Controlled Unclassified Information remain fully enforceable in all three DMV jurisdictions. The 18 U.S.C. § 1833(b) whistleblower immunity notice should always be included, both to comply with the statute and to preserve the full range of DTSA remedies. SEC Rule 21F-17’s prohibitions on agreements that impede communication with the SEC about securities violations must also be respected in the drafting.

Garden leave

A garden leave arrangement keeps the employee on the payroll (with benefits, full compensation, but no work assignment) for a period after notice of departure. The employee remains an employee, the employer’s confidentiality and non-solicit obligations remain in effect, and the employer effectively buys a period during which the employee is not working for a competitor. Garden leave is increasingly used in lieu of post-termination non-competes for senior federal contractor employees because it provides similar protection while being more defensible on grounds of undue hardship.

Inventions assignment

Federal contractors with R&D, engineering, or innovation roles typically require assignment of inventions made during employment. The Bayh-Dole Act framework that governs federal funding of inventions interacts with these assignment provisions, but at the worker-to-employer level the standard invention assignment language is enforceable in Virginia, Maryland, and DC.

8. Federal Contractor Specific Factors (Clearance, Program Knowledge, Recompete)

Three federal contractor-specific factors shape non-compete analysis in ways that do not apply to private-sector commercial work: the clearance dynamic, the contract-bounded nature of program knowledge, and the SCA Section 4(c) successor framework.

Clearance and workforce mobility

The cleared federal contractor workforce moves among employers at high rates. The same engineers, analysts, program managers, and specialists circulate through the major primes throughout their careers. Aggressive non-competes against cleared workers face an unusually difficult undue hardship case because the cleared workforce often cannot find equivalent work outside federal contracting in the affected geography. Courts in the DMV have repeatedly noted the public interest factor when cleared workforce non-competes are challenged: federal contracting depends on a fluid cleared workforce, and overly restrictive non-competes against cleared workers can themselves harm the public interest in efficient federal procurement.

Contract-bounded program knowledge

Federal contractor work is often tied to a specific federal contract that has a defined performance period and ends in completion or in loss in recompete. The knowledge an employee acquires during performance is typically tied to the specific contract and the specific federal customer relationship. When the contract ends, the protectable interest the employer might have asserted (program continuity, customer goodwill) often ends with it. A non-compete that would have made sense during contract performance often makes much less sense once the contract has ended.

SCA Section 4(c) and recompete transitions

When a federal service contract is lost in a recompete, the winning contractor often has to honor incumbent wage rates and benefits under SCA Section 4(c). Many employees transition from the incumbent to the winning contractor during the recompete process. Non-competes against incumbent workers during the recompete window raise additional public-interest concerns because they can interfere with the government’s interest in the continuity of contract performance. Federal contractor employers that want to enforce non-competes in this window often find courts unsympathetic.

Cleared clearance handoff

A cleared worker’s clearance is held by the worker and sponsored by the employer; when the worker transitions to a new cleared employer, the sponsorship typically transitions with reasonable continuity. Non-competes that would effectively prevent a cleared worker from continuing to work in their cleared specialty often run into the cleared workforce mobility concerns above.

9. Enforcement and Defense Litigation Patterns

Non-compete litigation in the federal contractor setting follows recognizable patterns. From the employer side, the typical case involves an executive or senior technical employee leaving for a competitor (often a direct competitor on a specific federal contract), the employer seeking a temporary restraining order or preliminary injunction to prevent the employee from beginning work, and discovery focused on the employee’s job duties at the prior and new employer and on whether confidential information was misappropriated. From the employee side, the typical defense involves attacking the enforceability of the agreement under the applicable state framework, demonstrating that the new role does not implicate the protectable interest the employer is asserting, and (where applicable) raising the public interest in cleared workforce mobility.

Preliminary injunction practice

The employer seeking to enforce a non-compete typically files for a preliminary injunction under FRCP 65 (or state-court equivalent). The four-factor preliminary injunction analysis (likelihood of success, irreparable harm, balance of equities, public interest) is where most non-compete cases are won and lost. Federal contractor employees who can show that the new employment is in a different program, with a different customer, or in a different role often have strong responses on the irreparable harm prong.

Trade secret claims as alternatives

Employers facing weak non-compete arguments often pivot to DTSA and state trade secret claims. The DTSA inquiry focuses on whether the employee actually misappropriated trade secrets rather than on whether the employee was contractually restricted from competing. The fact patterns that support DTSA claims differ from those that support non-compete claims, and litigants on both sides need to understand which inquiry they are actually addressing.

Settlement patterns

Most non-compete litigation settles. Common settlement structures include: agreed narrowing of the restriction’s scope or duration; agreed non-solicit covenants in lieu of the original non-compete; agreed confidentiality reaffirmations and assurances about specific trade secrets or programs; payments either way; agreed delays before commencing the new role. Litigation lawyers on both sides spend most of their non-compete time on settlement architecture.

Declaratory judgment actions

Employees considering a transition sometimes pursue declaratory judgment actions to obtain a binding determination that a non-compete is unenforceable before committing to a new role. The declaratory judgment posture can shift litigation leverage by moving the matter to a forum and timing chosen by the employee.

10. How Shin Law Office Approaches Non-Compete Matters

My practice on non-competes covers both the worker and contractor sides, with conflict-of-interest rules applying. For federal contractor employees, my work covers: reviewing offered employment agreements before signing; advising on existing non-compete obligations when a new opportunity arises; pre-departure planning and negotiation with the current employer; defense of TRO and preliminary injunction motions; declaratory judgment actions when warranted; and trade secret defense alongside non-compete defense when DTSA claims are also asserted. For federal contractors, my work covers drafting non-compete, non-solicit, non-disclosure, and garden leave provisions tailored to the workforce and the protectable interests; counseling on enforcement decisions; preliminary injunction practice; and DTSA trade secret claims alongside or in lieu of non-compete enforcement.

For workers, the first conversation typically focuses on: the specific text of the non-compete; the wage threshold analysis under the applicable state framework; the protectable interest the employer would assert; the nature of the new opportunity; the realistic enforcement risk and the practical timeline; and the negotiation posture. Many worker-side non-compete situations are resolved through pre-departure negotiation rather than litigation. For contractors, the first conversation covers: the specific employee transition or the broader policy question; the protectable interest analysis; the realistic enforcement appetite; the alternative protections (non-solicit, NDA, garden leave) and which fit best; and the litigation risk if enforcement is pursued.

The first consultation is offered without obligation, usually takes 1 to 2 hours, and is protected by the attorney-client privilege.

Summary

Non-compete enforceability in the DMV varies sharply across the three jurisdictions. Virginia voids non-competes for low-wage employees and for all hourly workers, with statutory damages for violations under Va. Code §40.1-28.7:7. Maryland prohibits non-competes for workers below a wage threshold that has expanded through 2024 and 2025 amendments, with broad protections now extending to licensed health care workers earning up to $350,000 annually. DC bans most non-competes outright for workers below a $150,000 compensation threshold ($250,000 for medical specialists) under D.C. Code §32-581.01 et seq. The federal FTC non-compete rule was set aside in Ryan LLC v. FTC and is not currently in effect. Trade secret protection under the Defend Trade Secrets Act, non-solicit and non-disclosure clauses, and garden leave structures often do the work that traditional non-competes used to do, with better fit for the federal contractor workforce. Cleared worker mobility, contract-bounded program knowledge, and SCA Section 4(c) successor obligations all shape the non-compete analysis in ways that do not arise in non-contractor private-sector work.

Frequently Asked Questions

Anthony I. Shin, Esq.

PRINCIPAL ATTORNEY

Practice Areas
Meet Our Team
Shin Law Office, PLC
Leesburg, VA

 

Related Guides

References