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DC Passes New Law to Ban Non-Competition Agreements in DC

The District of Columbia Council voted 12-0 to approve the Ban on Non-Compete Agreements Amendment Act of 2020 (B23-0494) on December 15, 2020, and Mayor Bowser signed the bill on January 11, 2021. The bill, which prohibits the use and enforcement of non-competition agreements for all DC employees except certain highly paid physicians, will go into effect after the required 30-day Congressional review period and after it receives funding.

Provisions of the Bill:

The new law bans employers from including any non-compete provisions in employment contracts and from implementing a workplace policy that prohibits an employee from (1) being employed by another person; (2) performing work or services for pay for another person; or (3) operating their own business. The bill defines a non-compete agreement as a contract between an employer and an employee that 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 bill explicitly allows for confidentiality agreements for trade secrets and other proprietary information (e.g., client lists).

The bill also prohibits employers from retaliating or threatening to retaliate against an employee for refusing to agree to a non-compete provision or failing to comply with the employer’s non-compete provision or policy. Additionally, an employer may not retaliate against an employee who inquires about their rights or about a non-compete provision or policy that the employee reasonably believes is barred by the law.  The law further requires employers to notify their employees of the non-compete ban.

Exceptions to the Law:

The ban on non-compete agreements does not apply to volunteers, casual babysitters, certain members of religious organizations, and certain “medical specialists.”  The bill also allows a contract for sale of a business to restrict competition with the business.

The medical specialist exemption is carefully limited to only certain highly paid physicians, in particular to 1) licensed physicians 2) who have completed a medical residency and 3) earn at least $250,000 annually.  Additionally, any employer or prospective employer of a “medical specialist” must provide the proposed non-compete provision directly to the employee at least 14 days prior to the execution of the agreement containing the provision. Employers may not retaliate or threaten to retaliate against covered physicians who request this notice or who inform the employer, coworker, their lawyer, or a government agency about any conduct prohibited under the law.

Implications of the Ban:

The ban on non-competes for District of Columbia employees is one of the most sweeping in the nation, covering any employee who performs or will perform work in Washington, DC.  Banning non-compete agreements may result in increased wages for employees, especially hourly and low-wage workers, because opportunities for job mobility increase the likelihood that employers will raise pay to incentivize workers to stay rather than leave. Eliminating non-compete agreements will also allow employees to better leverage competing job offers into raises from their current employer.

Starting new businesses or finding better work without having to relocate can be key to individual wellbeing and personal fulfillment. This new ban on non-compete agreements may increase employees’ earning power, strengthen entrepreneurship, and provide more choices for employees who were terminated or are looking to leave an unpleasant work environment.

Enforcement:

Following expiration of the Congressional review period, the new law will disallow new non-compete provisions in contracts, rendering them void and unenforceable (the law is silent on the effect of existing non-compete agreements).  Employers who violate the law will be subject to penalties of $350 to $1,000 for each violation of law, and up to $3,000 for repeat offenders.  Employees may also file a civil action against employers that enforce unlawful non-compete agreements, retaliate against employees, or otherwise violate the law.

Correia & Puth represents employees in the negotiation of employment contracts and in resisting non-competition agreements, as well as employees who have been subjected to unlawful workplace treatment and retaliation.  The firm also represents employees in severance negotiations, where non-competition agreements are oftentimes acutely at issue.  If you have concerns about employment contracts or unlawful employer behavior, please contact us today.

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