On January 11, 2021, District of Columbia Mayor Muriel Bowser signed into law the Ban on Non-Compete Agreements Amendment Act of 2020 (the “Act”). The Act comprises one of the most extensive bans on non-competition clauses in the country, although many questions still remain, notably its effective date.
The Ban on Non-Competes
Overall, the Act is one of the most restrictive limitations on the use of non-compete covenants in the United States to date. With limited exceptions, discussed below, the Act prohibits employers from requiring or requesting an employee sign an agreement that contains a provision which prohibits the employee from:
- Being simultaneously or subsequently employed by another person;
- Performing work or providing services for pay for another person; or
- Operating the employee’s own business.
The Act does not apply to:
- Volunteers at charities, religious or educational organizations, and non-profits;
- Lay members in office at religious organizations;
- Babysitters; or
- Licensed physicians who earn total compensation of at least $250,000 per year.
There is also an exception for non-competes used between the buyer and seller of a business.
The Act was sent to Congress for a 30-day legislative review on February 1, 2021. Absent congressional intervention, the Act is expected to become law on March 15, 2021. However, DC laws which reflect unbudgeted costs are subject to appropriations before becoming effective. In other words, the effective date of the Act will not occur until after the Act’s inclusion in DC’s budget, which is expected this fall. Whether there is a distinction between the applicability date and effective date is not fully explained in the Act but may be very important.
The Act provides that non-compete provisions which are “entered into on or after the applicability date of this title between an employee and an employer shall be void as a matter of law and unenforceable.” Therefore, non-compete restrictions which exist prior to the effective date of the Act will continue to be enforceable.
Notice to Employees
Employers are required to provide employees with the following 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.
The notice must be provided no later than: (a) 90 calendar days after the Act’s applicability date; (b) 7 calendar days after an individual becomes an employee of the employer; and (c) 14 calendar days after an employer receives a written request for the notice from an employee.
Employers have a narrow window to both implement any necessary restrictive covenants prior to the Act’s taking effect, and to prepare to comply with the Act’s restrictions following its effective date, including the notice provision discussed above. Employers should review employment agreements, confidentiality agreements, employee handbooks, invention assignment agreements, business protection agreements, and any other similar agreement or workplace policy to ensure that non-competition restrictions are replaced by strong and enforceable non-solicitation and non-disclosure covenants.
For questions on this or any other legal matter, please contact Jordan Savitz at firstname.lastname@example.org.
ABOUT JORDAN SAVITZ
As a member of Offit Kurman’s Business Law and Transactions practice group, Jordan Savitz advises clients in all stages of the business life cycle. He assists clients with matters including, but not limited to, choice of entity, complex operating and stockholder agreements, compliance with Rule 506 of Regulation D, real estate leasing, employment agreements, website terms and conditions, trademark filings, complex contract drafting and negotiation, succession planning, as well as stock and asset purchase agreements.
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