DC City Council Passes Broad Noncompete Ban

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On Dec. 15, 2020, a unanimous District of Columbia City Council approved a broad ban on noncompete agreements and “moonlighting” policies that would be among the most restrictive in the nation. Since adoption of the Defend Trade Secrets Act in 2016, 11 states have enacted legislation regulating the use of noncompetes, including prohibiting them for lower-wage employees, which recently occurred both in nearby Maryland (in 2019) and Virginia (in 2020), but no state has chosen to join California in prohibiting the enforcement of employment-based noncompetes across the board.

Under the approved bill, following its enactment, any “non-compete provision contained in an agreement that was entered into on or after the applicability date … between an employee and an employer shall be void as a matter of law and unenforceable.” Additionally, the law prohibits employers from having a workplace policy that prohibits employees from being “employed by another person,” performing “work or providing services for pay for another person” or operating “the employee’s own business.” Thus, it would appear that the legislation might allow employees to work for their employer’s competitor even while employed by their employer.

The legislation would apply to all employees in the district, with a few narrow exceptions, including one for highly compensated medical specialists earning more than $250,000 per year.

In addition to the restrictions against noncompetes, the bill would impose upon employers the duty to notify their employees about the law, with civil penalties for noncompliance.

The bill is now before Mayor Muriel Bowser. If the mayor does not veto the legislation, it will next head to Congress, where it could still be disapproved. However, absent any action stopping the legislation, employers should be aware that there is a strong possibility that they might not be able to obtain valid noncompete agreements in the District of Columbia or enforce policies to stop employees from working for other employers sometime early next year. More to follow as the legislation advances.

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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