No More Non-Competes

The District of Columbia is now poised to put into law a ban on non-competition provisions, and it perhaps the nation's most sweeping in the restrictions it places on employers.

The District of Columbia Council recently passed the Ban on Non-Compete Agreements Amendment Act at the end of 2020. Broadly speaking, the Ban prevents employers from requiring an employee that performs work in the District to sign an agreement that includes a non-compete provision, which prohibits an employee from "being simultaneously or subsequently employed by another person, performing work or providing services for pay for another person, or operating the employee's own business."

Non-compete clauses are common in employment agreements and contracts and generally refer to concurrent employment and anticipate a possible time after the employee and the employer part ways. They force the employee to agree not to pursue business that taps the same market as the employers.

The scope of the new District Ban is very broad. It covers "any employee working in the District" (although it does exclude babysitters, some volunteers, some medical professionals) and "lay member[s] elected or appointed to office within the discipline of any religious organization and engaged in religious functions"). The Ban was signed by Mayor Muriel Bowser on January 11, 2021 and become effective after a 30-day review period. Non-Complete provisions executed after the date the Ban went into effect are impacted.

The Ban excludes "Medical specialists," which are defined as any individual who performs work in the District "on behalf of an employer engaged primarily in the delivery of medical services," and who (1) holds a license to practice medicine, (2) is a physician, (3) has completed a medical residency, and (4) earns at least $250,000 in compensation per year. Additionally, medical specialists must be given at least fourteen days to consider any non-compete their employer asks them to sign.

Additionally, the Ban refers to provisions of a "written agreement between an employer and an employee that prohibits the employee from being simultaneously or subsequently employed by another person, performing work or providing services for pay for another person, or operating the employee's own business."

The Ban does not prohibit employment agreements that restrict an employee from revealing confidential and other proprietary information, such as trade secrets, customer lists, and the like. The Ban also does not apply to agreements between a business seller and its buyers in which the seller agrees not to compete with the buyer's business.

Under the new law, employers cannot restrict employees from operating their own businesses — both after their separation and even during their employment.

The Ban requires employers to provide employees with specific notice, in writing:

"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."

Employers much provide notice to employees ninety calendar days after the Act becomes effective, seven calendar days after an individual becomes an employee, and fourteen calendar days after the employer receives a written request for a notice from the employee.

The second part of the Ban restricts retaliation from employer to the employee. Retaliation refers to an employer taking negative action against a former employee who refuses to agree to a non-compete provision, or more accurately under the Ban, if the employee asks about the validity of a non-compete provision in an employment agreement. This part of the law extends to an employee's inquiry regarding a non-compete provision to not just the employer, but also to coworkers, the employee's lawyer or agent, or to a government entity.

Employers should consider ensuring their agreements regarding confidentiality and propriety information are reviewed and as strong as possible. 

The SJS Law Firm can help you resolve this issue. For a complimentary consultation, please contact us at (202) 505-5309.