On December 15, 2020, the District of Columbia Council unanimously passed one of the strictest bans on employee non-compete agreements in the country, prohibiting nearly all such restrictions on employment both during and after an employee leaves employment with a DC employer.
The Ban on Non-Compete Agreements Amendment Act of 2020 (the “Act”) prohibits any DC employer from requesting or requiring an employee to sign a non-compete agreement. The Act defines a “non-compete” to include any provision that limits an employee’s ability to (1) be simultaneously or subsequently employed by another person; (2) perform work or provide services for pay to another person; or (3) operate the employee’s own business. Thus, in addition to restricting post-employment covenants, the Act limits a DC employer’s ability to place restrictions on a current employee’s ability to work competitively during employment. The non-compete ban applies to all employees except (1) volunteers, (2) certain leaders of religious organizations, (3) in-home baby-sitters; and (4) “Medical Specialists,” defined as certain licensed doctors earning at least $250,000 per year.
The Act does explicitly allow for continued restrictions on the disclosure of confidential information and trade secrets. There is also a carve-out for non-competes included as part of a contract for the sale of a business. The Act is silent as to non-solicitation restrictions, raising questions as to whether such restrictions will remain enforceable in DC.
Non-compete agreements entered into prior to the enactment of the Act will be “grand-fathered” and can continue to be enforced. Accordingly, DC employers considering non-compete restrictions for their employees would be wise to finalize and enter into those agreements quickly. Employers should also review their policies related to outside employment and confirm that they are updated as needed to coincide with the prohibitions in this Act.
If enacted into law, the Act requires employers to provide notice of the Act to all employees within 90 days of its applicability and going forward, within a week of an employee’s hire. The Act includes anti-retaliation provisions and provides a private cause of action to employees as well as the possibility of government enforcement and civil penalties for employers who violate its provisions.
The Mayor has not yet acted upon this Act; however, even if the Mayor were to veto it, the DC Council has the votes needed to overturn such a veto. Thus, unless Congress and the President take action against the Act during Congress’s 30-day period of consideration following the Mayor’s action, it is likely that the Act will be enacted and become law early in 2021.
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