- Employers are prohibited from requiring anti-compete clauses for D.C. based employees
- Employers are required to provide notice to D.C. based employees of their rights under the Act
On January 11, 2021, District of Columbia (“D.C.”) Mayor Bowser signed the Ban on Non-Compete Agreements Amendment Act of 2020 (“the Act”) into law. The Act broadly prohibits the use of non-compete agreements and prevents employers covered by the Act from prohibiting employees from competition during their course of employment. The Act will only apply to non-competes entered into after its effective date (which remains to be determined) and expressly does not apply to confidentiality agreements.
Who Does the Act Apply to?
The Act applies to all employers and employees within D.C. Notably, the Act broadly defines the term “employee” as an individual who performs work in D.C. on behalf of an employer or a prospective employee who an employer reasonably anticipates will perform work on behalf of the employer in D.C. The Act does not state a certain threshold of amount of work performed in D.C. that would trigger employee coverage under Act, nor does the Act address remote work. Employers uncertain about whether they are required to comply with the Act are encouraged to speak with employment law counsel absent further guidance from the District.
What Does the Act Prohibit?
The Act prohibits employers from:
- Requiring or requesting that an employee sign an agreement with a non-compete clause;
- Having an employment policy (written or unwritten) that prevents an employee from:
- Being employed elsewhere
- Performing work or providing services elsewhere
- Operating their own business
The Act also prohibits retaliation against employees for asserting their rights under the Act, including for refusing to agree to a non-compete, failure to comply with an unenforceable non-compete agreement, or complaining about the existence and validity of a non-compete provision or policy.
Is there a Notice Requirement?
Employers are required to provide their D.C.-based employees notice on the following intervals:
- Within 90 days of the effective date of the Act,
- Seven (7) calendar days after an individual becomes an employee, and
- Within fourteen (14) calendar days after receipt of a written request from an employee.
The Act also provides the following mandatory language that will need to be included in the employer notice:
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.
It is not yet clear whether it is sufficient to provide this notice to employees electronically, however, we anticipate further guidance in the coming months as the Act requires the Mayor to issue implementing rules and regulations.
What are the Penalties?
The Act authorizes penalties for violations, including violations of its anti-retaliation protections. Penalties range from $350 up to $3,000 per employee, depending on the nature of the violation. The Act also gives employees a private right of action to file an administrative complaint or a civil action in court.
What is the Effective Date?
The effective date is not year clear. Now that the D.C. Mayor has approved the law it is subject to a 30-day period of congressional review pursuant to the Home Rule Act. It is important to note that the Act does not have a retroactive impact on non-compete agreements entered into prior to the Act’s effective date and those agreements will remain enforceable.
D.C. employers are encouraged to review with counsel any current non-compete clauses or restrictive covenants and policies in light of the Act and prepare for compliance with the notice requirements.
Disclaimer: This content is intended for informational purposes only and should not be construed as legal, medical or tax advice. It provides general information and is not intended to encompass all compliance and legal obligations that may be applicable. This information and any questions as to your specific circumstances should be reviewed with your respective legal counsel and/or tax advisor as we do not provide legal or tax advice. Please note that this information may be subject to change based on legislative changes. © 2021 Sequoia Benefits & Insurance Services, LLC. All Rights Reserved