The Ban on Non-Compete Amendments Act of 2020 (the Act) is a sweeping piece of legislation that effectively bans the use of all non-compete agreements in the District of Columbia, regardless of income level. Once effective, the Act will:
- Prohibit the use and enforcement of non-compete agreements for all employees working in D.C., with limited exception;
- Prohibit anti-moonlighting and other workplace policies that prohibit an employee from performing work for another employer, even if a director competitor; or operating their own business (an employee will be able to compete with his or her employer while actively working for that employer);
- Require employers to provide covered employees with written notice of the Act within 90 days of its effective date, within seven days to any newly hired employees, or within 14 days of any employee request, using the following language: “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.”
The Act will only prohibit those non-competes entered into after the law goes into effect. Pre-existing agreements are not invalidated by the new law. The Act applies to all employees who perform work in D.C. on behalf of an employer. The few exceptions are: physicians earning more than $250,000 per year, casual babysitters, certain religious organization officials, and volunteers at educational, charitable, religious or non-profit organizations. Further, non-competes are permissible in the context of the sale of a business, when the seller executes the non-compete contemporaneously with the agreement to sell the business.
Confidentiality agreements, which many employers use to protect confidential, propriety, sensitive information such as client or customer lists, are still permissible. The Act is silent on whether it would prohibit non-solicitation agreements, which typically are used to prohibit or limit an employee’s ability to contact other employees or customers post employment termination. The statutory language speaks only to non-competes but has some ambiguous language that would benefit from additional guidance or regulations.
The precise effective date of the Act remains unclear. The 30-day Congressional review period has expired so the Act will become law once it is published in the D.C. Register, which could happen any day. The Act will not apply until its fiscal impact is included in an approved D.C. budget and financial plan, which is certified by the D.C. CFO with notice to the D.C. Budget director. The Act is expected to be effective sometime later in 2021. We will continue to monitor and update.