Mayor Bowser Signs Broad DC Noncompete Ban – Certain Requirements Apply to Employers That ‘Don’t’ Utilize Noncompete Agreements!

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As we reported here last month, 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. On Jan. 11, 2021, Mayor Muriel Bowser signed and approved the Ban on Non-Compete Agreements Amendment Act of 2020. It now will be referred to Congress, where the legislature can disapprove the law within 30 days of the referral, although this is not expected.

Given the strong likelihood that the law will soon be in effect (likely sometime in February), employers in the District should begin preparing for some of the law’s requirements and ensure that any internal policies regarding noncompete agreements are updated to reflect the changing legal landscape. All employers should be cognizant of these requirements, including those employers who do not utilize non-compete agreements.

In particular, employers that do not utilize such agreements should be aware of two provisions with which they must comply – one relates to the law’s notice requirements and the other relates to employees “moonlighting” (i.e., working second jobs).

With respect to the notice requirements, all employers will be required to provide their employees with a notice that contains the following language:

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 provided to all employees within 90 days of the statute becoming effective. The notice must also be provided to employees within seven calendar days of their commencement of employment and within 14 calendar days after an employee requests such a statement from the employer. An employer that violates the notice provisions shall be liable (in an action brought by the mayor or by an employee either in an administrative proceeding or in court) for a penalty of $500 to $1,000 for an initial violation. Subsequent violations shall be penalized at the rate of not less than $3,000 to each affected employee.

The statute also provides that an employer may not maintain workplace policies that prohibit an employee from working for another person, performing work or providing services for pay for another person, or operating the employee’s own business. Many employers maintain policies against employees working second jobs, which sometimes are forgotten about in policy manuals.  Each employer of individuals in the District of Columbia should promptly review its policies to determine whether they have such a policy and, if so, revise it accordingly. As with the notice requirements, employers maintaining such policies are subject to monetary penalties.

The ban on these types of policies creates the possibility that employers will not be able to prevent an employee from simultaneously working for the employer and one of the employer’s competitors simply because they are working for the competitor.

As the greatest possibility for the finding of a substantial monetary violation of the notice and policy provisions of the act will occur when it first becomes effective (either because the employer fails to give the notice within 90 days to all its employees or because an anti-moonlighting policy has gone unrevised), employers should begin readying for this change. This might especially be true of employers that have nationalized human resources policies or utilize centralized human resources management outside the District and might not be otherwise aware of some of the more subtle aspects of the statute beyond the ban on noncompetes.

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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