D.C. Scales Back Non-Compete Ban

Garrett Wozniak
Garrett Wozniak

In 2021, the District of Columbia City Council enacted the Ban on Non-Compete Amendments Act of 2020.  The law was slated to prohibit the use and enforcement of non-compete agreements for nearly all employees working in D.C., with limited exceptions.  The law would also prohibit anti-moonlighting and other workplace policies that bar an employee from performing work for another employer, even if a direct competitor, or operating their own business.

Following feedback on the law and in anticipation of it going into effect, the D.C. City Council has passed the Non-Compete Clarification Amendment Act of 2022, which amends the non-compete law in significant ways. The law, subject to congressional review, will take effect October 1, 2022.

The amended law prohibits non-compete agreements for workers who are not “highly compensated.”  Someone is highly compensated under the law if they make at least $150,00 (the threshold is $250,000 for specialist physicians).  Non-compete agreements signed on or after October 1, 2022, and that cover employees under the applicable threshold, are void.  The income threshold is pegged to the Consumer Price Index and will change each year beginning in 2024.

The prohibition on non-competes applies to employees who are not highly compensated and who (1) spend more than 50% of their work time for an employer in the District; or (2) whose employment is based in the District and the employee regularly spends a substantial amount of their work time in the District, and not more than 50% of their work time in another jurisdiction.  Covered employees include those who have not yet begun working for an employer who are reasonably expected to satisfy either of the 50% benchmarks.  “Covered employee” includes “broadcast employees” regardless of whether such employees are highly compensated.  A broadcast employee means positions such as anchors, disc jockeys, editors, producers, program hosts, reporters, and writers for television, radio, satellite, and cable stations/networks.

Another key component of the amendments is that employers can prohibit employees from working for a competitor while employed by the employer.  The prior iteration barred anti-moonlighting provisions.  

For highly compensated employees, non-compete provisions and agreements must be in writing and provided to the employee “[a]t least 14 days before the individual commences employment for the employer” or, “[i]f the employer already employs the highly compensated employee, at least 14 days before the employee must execute the agreement.”  The writing must specify:

  • “The functional scope of the competitive restriction including what services, roles, industry, or competing entities the employee is restricted from performing work in or on behalf of;”
  • “The geographical limitations of the work restriction;” and
  • “If the employee is not a medical specialist, a term of non-competition that does not exceed 365 calendar days from the date the employee separates from employment with the employer” or “[i]f the employee is a medical specialist, a term of non-competition that does not exceed 730 calendar days from the date the employee separates from employment with the employer.”

The third bullet point means that non-compete agreements for non-medical specialists, where allowed by the law, cannot last longer than a year after the employee’s separation.

Employers presenting non-compete agreements to highly compensated employees must also provide a prescribed notice stating:

The District of Columbia Ban on Non-Compete Agreements Amendment Act of 2020 limits the use of non-compete agreements. It allows employers to request non-compete agreements from “highly compensated employees” under certain conditions. [Name of employer] has determined that you are a highly compensated employee. For more information about the Ban on Non-Compete Agreements Amendment Act of 2020, contact the District of Columbia Department of Employment Services (DOES).

The amendments also:

  • Redefine “non-compete provision” to mean “a provision in 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.” This definition covers both agreements with non-compete provisions as well as employer policies/handbooks.
  • Permits restrictions, if “otherwise lawful,” that restrict employees from “[d]isclosing, using, selling, or accessing the employer’s confidential employer information or proprietary employer information”; or restrict employees from engaging in certain conduct that might be a conflict of interest or lead to disclosure of confidential or proprietary information.
    • “Confidential employer information” means “information owned or possessed by the employer which is not available to the general public and which the employer has taken reasonable steps to ensure is protected from improper disclosure.”
    • “Proprietary employer information” means “information unique to an employer that is compiled, created, or solicited by the employer, including customer lists, client lists, and trade secrets as that term is defined in” D.C’s Uniform Trade Secrets Act.

The law’s anti-retaliation provisions prohibit actual or threatened retaliation against covered employees because the employee:

  • refused to agree to a non-compete provision or non-compete agreement that is prohibited by the law;
  • allegedly failed to comply with a non-compete provision or non-compete agreement that is prohibited by the law;
  • asked, informed, or complained about the existence, applicability, or validity of a provision in a workplace policy or employment agreement that the employee reasonably believes is prohibited by the law, or made a request for a copy of such a provision, to an employer, supervisor, coworker, covered employee’s lawyer or agent, government entity; or
  • asked the employer for the information required to be provided to the employee pursuant to the law.

It is also unlawful to retaliate (or threaten to do so) against a highly compensated employee for asking for a copy of a proposed or executed non-compete provision or agreement; asking the employer for the information required to be provided to an employee under the law; or asking about or objecting to a proposed non-compete provision or agreement because the employee reasonably believes that the provision or agreement is unlawful under the Act (where the inquiry or objection is made to an employer, coworker, employee’s lawyer or agent, or government entity).

Employers are required to disclose to employees when the employer has a workplace policy that includes one or more of the exceptions to the definition of non-compete provision.  Employers must provide the written notice within 30 days after the employee’s acceptance of employment, within 30 days after October 1, 2022, and any time such policy changes.

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