Washington, D.C.’s Ban on Non-Compete Agreements Amendment Act of 2020 (the “Act”), became effective on March 16, 2021, with the expiration of the 30-day window for Congressional review. The Act prohibits a D.C. employer from requiring any employee, who performs work for that employer in D.C., to sign a non-compete agreement or having a workplace policy that prevents employees from working for themselves or another entity, even while currently working for the employer.
However, the law is not applicable until it is included in an approved budget and financial plan, which will not happen until June 2021, at the earliest. Additionally, as part of that budgetary process, the law may be modified. This applicability date is key because only non-compete agreements entered into after the applicability date are invalid. Therefore, employers have a little over two months to ensure that any employees who should be subject to a non-compete provision, due to their access to confidential or trade secret information and/or client goodwill, have signed a valid non-compete agreement. For existing employees, employers should provide additional consideration beyond continued employment to ensure that the agreement is supported by sufficient consideration as continued at-will employment, unless for a lengthy period of time, may not be sufficient consideration in D.C.
Employers should also review their handbooks and policies to revise any rules that prohibit outside employment, as those will no longer be valid either.
While the Act specifically does not apply to confidentiality or trade secret provisions, it is less clear whether a non-solicitation provision could be considered an invalid non-compete provision. The Act also does not apply to a non-compete agreement that is part of the sale of a business. Finally, there are a few exceptions for volunteers, religious officials engaged in religious functions, casual babysitters, and physicians who earn at least $250,000 per year.
The Act prohibits retaliation against employees who refuse to sign an invalid non-compete agreement, refuse to comply with invalid workplace policies, or complain about an agreement or policy the employee reasonably believes is invalid. There are administrative penalties for violations of the law, and aggrieved employees can pursue an administrative or civil cause of action.
Employers must provide a one-sentence notice specified by the law to all employees within 90 days of the applicability date, seven days after an individual becomes an employee, and 14 days after an employee makes a written request for such a statement.
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