The District of Columbia’s Ban on Non-competition Provisions, Revisions to the Law, and How They Might Affect Your Business

The District of Columbia Council passed the Ban on Non-Compete Agreements Amendment Act at the end of 2020. After a series of recent amendments, the law is set to take effect on October 1, 2022. 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." Bill 24-256, as it’s called, was revised this summer to maintain that conflicts of interest requirements, and provisions preventing employee use of sensitive information, are not impacted by the District’s non-compete restrictions. 

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 a business that taps the same market as the employers.

The scope of the formerly sweeping District Ban has been narrowed to cover only those employees earning less than $150,000; or less than $250,000 if the employee is a medical specialist. In addition, the ban now explicitly excludes babysitters, certain medical professionals, and broadcast employees of a radio, television, or satellite station. 

The reconstructed ban was signed by Mayor Muriel Bowser on July 27, 2022, effective October 1, 2022. Non-Complete provisions executed before the date the ban went into effect are impacted. Employers have 30 days from October 1, 2022, to comply with the ban and provide employees with written copies of policies that are exceptions to the prohibition (such as confidentiality policies or policies excluding buyer-seller competition). After the law takes effect, employers are to provide employees written notice of policies that are exceptions to the ban within 30 days of employment and any time the non-compete law changes. 

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.

The ban’s exclusion of “Broadcast employee” includes “on- or off-air creator (such as an anchor,

disc jockey, editor, producer, program host, reporter, or writer) of a legal entity that owns or

operates one or more of the following: (A) A television station or network; (B) A radio station or network; (C) A cable station or network; (D) Satellite-based services similar to a broadcast station or network; or (E) Any other entity that provides broadcasting services such as news, weather, traffic, sports, or entertainment programming.”

Additionally, the ban refers to provisions of a “written agreement or a workplace policy that prohibits an employee from performing work for another for pay or from 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 qualifying/covered 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 may require or request that a covered employee sign an agreement or comply with a workplace policy that includes a non-compete provision."

If requiring a non-compete provision, employers must now provide notice to the highly compensated employees at least fourteen calendar days before employment or if already employed, at least fourteen calendar days before the employee must execute the agreement.

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 a government entity.

Employers should consider ensuring their agreements regarding confidentiality and propriety information are reviewed and as strong as possible. Small business owners will also want to modify any employment provisions that can be misconstrued as non-compete clauses. 

If requiring a non-compete provision, employers must now provide notice to the highly compensated employees at least fourteen calendar days before employment or if already employed, at least fourteen calendar days before the employee must execute the agreement.

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 a government entity.

Employers should consider ensuring their agreements regarding confidentiality and propriety information are reviewed and as strong as possible. Small business owners will also want to modify any employment provisions that can be misconstrued as non-compete clauses. 

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