D.C. Passes Ban on Non-Compete Agreements Amendment Act of 2020

Smith, Gambrell & Russell, LLP

On January 11, 2021, District of Columbia Mayor Muriel Bowser signed the Ban on Non-Compete Agreements Amendment Act of 2020 (the “Act”).  This Act will almost entirely ban non-compete agreements and similar workplace policies in D.C., prohibiting employers from restricting an employee’s employment by a competitor.  The Act defines a “non-compete provision” as a provision of a written agreement between an employer and an employee that prohibits the employee from being employed, either during or after the employee’s employment, by another person or operating the employee’s own business.

This Act applies to all D.C. employers and most employees working in D.C. regardless of the employee’s income.  The Act specifically excludes from the definition of “employee”: unpaid volunteers, law members elected or appointed to office within any religious organization, babysitters, and medical specialists (defined as licensed physicians who have completed residency with a total compensation of $250,000 per year).

The Act permits non-compete provisions between employers and medical specialists so long as the employer provides the proposed non-compete provision to the medical specialist at least 14 days before the execution of the agreement and the employer provides a written notice that complies with the Act.

Additionally, the Act requires all employers to provide written notice stating: “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 Amendment Act of 2020.”  This notice must be given (1) ninety calendar days after the Act becomes effective, (2) seven calendar days after an individual becomes an employee, and (3) fourteen calendar days after the employer receives a written request for notice from the employee.  All D.C. employers must provide this notice, regardless of use of non-compete agreements.

At this time, the Act does not apply to non-compete provisions entered prior to the Act’s effective date, but does apply retroactively to workplace policies.  This means that all existing non-compete agreements will be effective under applicable law.  But, all workplace policies that prohibit the employee from being employed, either during or after their employment, by another person or operating the employee’s own business are invalidated.  Once the Act goes into effect, virtually all non-compete provisions will be prohibited.  Notably, this Act only applies to non-compete provisions and workplace policies.  Employers are still permitted to continue to use confidentiality agreements and non-solicitation agreements.

Under the Act, employers may face liability for using non-compete provisions, and the Act makes it unlawful for an employer to retaliate against an individual for refusing to agree to, or failing to comply with, a prohibited non-compete provision.

At this time, D.C. employers should review all employee handbooks, policies, and current non-compete agreements to ensure compliance with the Act. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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