On December 15, 2020, the Council of the District of Columbia voted unanimously to approve the Ban on Non-Compete Agreements Amendment Act (Bill 23-494) (the “Act”), which would ban the use of non-compete provisions in employment agreements and workplace policies for all employees, with a few narrow exceptions. If enacted, Washington, DC will have one of the strictest bans on non-compete provisions in the United States.
Non-Compete Provisions Prohibited
The Act would ban all employers operating in DC and all employers with employees in DC, but not the DC government or the United States government, from requiring or requesting an employee to sign an agreement that includes a non-compete provision or having workplace policy that prohibits an employee from: (1) being employed by another person; (2) performing work or providing services for pay for another person; or (3) operating the employee’s own business. The ban would apply to all employees except: (1) volunteers of educational, charitable, religious, or nonprofit organizations; (2) certain members of religious organizations; (3) casual babysitters; and (4) “medical specialists.”
Notably, the Act is not retroactive, and only prohibits all covered non-compete provisions entered into on or after the date the Act is enacted.
Employer Retaliation Prohibited
The Act would prohibit an employer from retaliating or threatening to retaliate against an employee for: (1) the employee’s refusal to agree to a non-compete provision; (2) the employee’s failure to comply with a non-compete provision or a workplace policy that prohibits an employee from competing; (3) inquiring about their rights under the Act; or (4) requesting certain information about the Act.
Non-Compete Provisions for Medical Specialists
There is an exception in the Act for non-compete language directed towards a “medical specialist,” defined as a licensed physician who has completed a medical residency, engages primarily in the delivery of medical services, and earns $250,000 or more annually. An employer may still require a non-compete provision as a condition of a medical specialist’s employment, so long as, 14 days prior to the written execution of the agreement containing the provision, the employer provides (1) the non-compete provision and (2) written notice that provides the employer’s requirements under the Act (specific notice language is in the Act).
All DC employers must provide covered employees notice of the Act and its provisions (specific notice language is in the Act). The notice must be sent to all current employees within 90 days after the Act becomes effective and given to all new employees within 7 days of their start date.
Employer Violations of the Act
If an employer violates the Act, they may face both administrative and civil liability. The Mayor may fine employers between $350 and $1,000 for each violation of the non-competition provisions and notice requirements and $1,000 or more if an employer retaliates or threatens to retaliate.
In addition, individuals who feel that their rights have been violated under the Act may file an administrative complaint with the Mayor or a civil court action. If an employer is found to have violated the Act, it must pay each affected employee at least $500 for each violation and at least $3,000 for any subsequent violation.
We will continue to monitor developments surrounding the Act. If you have any questions regarding the Act or would like to discuss other employment matters, please do not hesitate to contact us.