D.C. Bans Non-Compete Agreements: What Does This Mean For Employers?

Earlier this year,  Washington, D.C. Mayor Muriel Bowser signed DC B23-0494, an Act also known as the “Ban on Non-Compete Agreements Amendment Act of 2020.” As one may gather from the title of the Act, this legislation essentially bans non-compete provisions from employment agreements in the District of Columbia. Specifically, this new law states “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.”

While the provisions included in non-compete provisions in employment agreements can vary, they typically prohibit an employee from (a) working for a business that competes with the contracted employer, (b) working for any entity or person other than their contracted employer during their “off hours,” (c) working in the same industry or geographical region as their contracted employer for a certain amount of time after their employment ends with that employer, or (d) some combination of these restrictions. Under the new Act, such clauses in an employment contract are unenforceable as a matter of law in the District of Columbia, with only limited exceptions.

Under the Act, an employee is defined as “an individual who performs work in the District on behalf of an employer and any prospective employee who an employer reasonably anticipates will perform work on behalf of the employer in the District.” An employer is defined as “an individual, partnership, general contractor, subcontractor, association, corporation, or business trust operating in the District, or any person or group of persons acting directly or indirectly in the interest of an employer operating in the District in relation to an employee, including a prospective employer, but does not mean the District of Columbia government or the United States government.” While the Act generally applies to all employees and employers, it specifically excludes charitable and/or non-profit volunteers, laypersons appointed or elected to positions within a religious organization, in home babysitters, and “medical specialists.” A medical specialist is defined as “an individual who performs work in the District on behalf of an employer engaged primarily in the delivery of medical services and who: holds a license to practice medicine; is a physician; has completed a medical residency; and has a total compensation of at least $250,000 per year.”

In addition to stating what an employer may not do in Washington D.C. with regard to non-compete provisions, the Act also details what an employer must do. Specifically, the Act requires employers to provide their employees with a written copy of the language quoted above,[1] no later than (1) ninety (90) calendar days after the applicability date of the Act; (2) seven (7) calendar days after an individual becomes an employee of the employer; and (3) fourteen (14) calendar days after the employer receives a written request for such statement from the employee.

The Act also prohibits employers from retaliating or threatening to retaliate against employees for: (1) their refusal to agree to a non-compete provision; (2) their alleged failure to comply with a non-compete provision or workplace policy made unlawful by the Act; (3) asking, informing, or complaining about the existence, applicability, or validity of a non-compete provision or a workplace policy that the employee reasonably believes is prohibited under the Act to: (a) an employer, including the employee’s employer; (b) a coworker; (c) the employee’s lawyer or agent; (d) a governmental entity; or (4) requesting the information the employer is required to provide under the Act, as described above. On the other hand, the Act does not ban employment agreements from prohibiting employees from disclosing trade secrets, confidential, and/or proprietary information, nor does it apply to agreements between the seller(s) of a business and the buyer(s) of that business under which the seller agrees not to compete with the buyer’s business.

Given this new legislation, there are a few things employers need to consider. First, employers who do business and/or who have employees who operate in the District of Columbia need to ensure that they comply with the requirement of the Act, as detailed above. Second, employers who have standard employment contracts that they present to prospective employees should consult an attorney to have these contracts reviewed to ensure that they comply with the provisions of the new Act. It may be wise for employers to whom the Act applies to include the language required by the Act in all future employment contracts. Employers should also keep in mind that employment agreements containing non-compete provisions which were signed before the Act went into effect are still valid and enforceable under Washington D.C. law. Finally, employers should take steps to ensure that their employment agreements are reviewed and that any confidentiality and/or proprietary information provisions contained therein are as strong as possible.

The language of the Act also raises an interesting question that, given how new this legislation is, has not yet been answered. If an employer located in Maryland, Virginia, or any other state has a non-compete provision in their contract with an employee and that employer and/or employee occasionally operates or works in the District of Columbia, is the non-compete provision void completely? The answer to this question is likely “no”; however, given the broad language of the Act and its recent adoption, at this stage there is simply no way of knowing. One option that an employer outside of the District of Columbia could take to address this question would be to include non-compete language in their employment agreements with a notation stating that the non-compete is not enforceable under District of Columbia law.