Last week, the D.C. City Council passed one of the most sweeping bans on non-competition agreements in the country. The bill (B23-0494), which passed 12-0, would prohibit non-compete agreements for nearly all employees working in the District of Columbia, with an exception for certain medical professionals.
Notably, the bill does not merely ban non-compete agreements for subsequent employment; it also bans non-compete agreements for simultaneous employment with another company. If this bill becomes law, an employer will no longer be able to prohibit its current employees from simultaneously working for a competitor.
While the aim of the bill is to stimulate the local economy by keeping professionals from leaving the D.C. area to pursue employment beyond the geographical range of a non-compete agreement, the broad sweep of the bill poses other issues.
For example, how will businesses be able to entrust confidential data to employees, who will now be free to work for competitors even while still being employed with their current company? Although the bill pays lip service to trade secret laws, as a practical matter there will inevitably be “leakage” when an employee entrusted with confidential information is simultaneously performing the same tasks at two different companies. Reasonably-restrictive non-compete agreements are the best defense against the disclosure of confidential proprietary data.
Also notable is that the bill provides a cause of action for employees who are asked to sign non-compete agreements. This is a complete 180-degree turn from the status quo, where companies could take legal action against former employees for violating non-compete agreements. Now, employees will be able to sue companies who ask them to enter non-compete agreements.
Though the intentions behind the bill may have been noble, the sweeping nature of the bill will likely cause headaches larger than the problems it was intended to address. Non-compete agreements are not always appropriate (they serve little function for hourly workers, for example). But it is eminently reasonable for an employer to prohibit certain salaried professionals from simultaneously working for a direct competitor. It will be fascinating to see how the D.C. Council’s experiment plays out—if the bill becomes law.