D.C. Bans (Almost All) Non-Compete Agreements

The District of Columbia will soon impose what is arguably the most sweeping non-compete ban in the country. With a few limited exceptions, the Ban on Non-Compete Agreements Amendment Act of 2020 (“the Act”) prohibits the use of non-competition agreements across all income levels both during and after employment.

Non-Compete Agreements. “Employee” is defined as someone who performs work in D.C. and any prospective employee “who an employer reasonably anticipates will perform work on behalf of the employer in the District.”  The Act’s only exceptions to the definition of employees is for “medical specialists,” who are licensed physicians that have completed a medical residence and earn $250,000 or more per year, volunteers, religious laypeople, and—rather oddly—casual babysitters who work in a residence. The Act also will permit a non-compete agreement if it is entered into contemporaneously with an agreement between the seller of a business and one or more buyers of the business.

Once the law is effective, employers will be prohibited from requesting that an employee enter into an agreement that includes a non-compete provision. Any such non-compete agreements entered into after the Act’s effective date will be void as a matter of law. The Act will not apply retroactively, so pre-existing agreements (that are otherwise legally compliant) should remain in effect.

Workplace Policies and Other Actions. Employers will also be barred from having workplace policies that prohibit an employee from 1) being employed by another person, 2) performing work or providing services for pay for another person, or 3) operating the employee’s own business. Essentially, employees will be able to compete with their employers while they are employed.

The Act expressly permits the use of confidentiality agreements, and is silent on restrictions on employee and customer solicitation.

Employers may also not retaliate against employees for refusing to enter into a non-compete agreement, failing to comply with an agreement or policy that is unlawful under the Act, or requesting the information that is required to be provided through the Act’s notice provision (discussed below). Employers will also be prohibited from retaliating against employees for asking, informing, or complaining to an employer, co-worker, lawyer, governmental agency about the validity of a non-compete or workplace policy that the employee reasonably believes is prohibited.

Notice. Employers should also take particular note that the Act will require employers to provide all employees—even those with valid non-compete agreements entered into prior to the Act—with a notice that states: “No employer operating in the District of Columbia may request or require any employee working in the District of Columbia to agree to a non-compete policy or agreement, in accordance with the Ban on Non-Compete Agreements Act of 2020.” Employers must provide the notice to all employees within 90 days of the Act’s effective date. Employers must provide the notice to any new hire within 7 days of the start date, and to inquiring employees within 14 days of the request.

Enforcement. The Mayor and Attorney General will administer and enforce the Act, and may promulgate regulations that provide further clarity. An aggrieved individual may pursue relief through an administrative complaint or a civil action.

The law becomes effective following a 30-day Congressional review period and publication in District of Columbia register. In the meantime, employers with employees working in D.C. are wise to review and revise their agreements now for future use.