In mid-December, the D.C. Council passed what may perhaps be the broadest ban on non-compete provisions in employment agreements in the United States. If enacted by the Mayor, this ban would affect nearly every D.C. employer.
The Ban on Non-Compete Agreements Amendment Act of 2020 (the “Act”) prohibits an employer from requiring or requesting “that an employee sign an agreement that includes a non-compete provision.” Babysitters and certain medical professionals are exempt from this ban. Importantly, the term “non-compete provision” means “a provision of a written agreement 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 employees own business.” This means that most employers in D.C. will not be able to prevent their employees from working for a competitor.
However, the Act does not prohibit non-solicitation provisions or provisions that protect an employer’s trade secrets and other proprietary information. The Act also excludes non-compete agreements entered into simultaneously with the sale of a business, allowing a business to insist that the seller does not compete with the buyer.
All covered non-compete provisions contained in agreements entered into after the Act takes effect will be void and unenforceable. Agreements entered into before the Act takes effect are not discussed by the Act, and will presumably continue to be enforceable.
The Act now heads to the Mayor, who has expressed some concerns about the Act. However, the Act passed with a veto-proof majority, meaning that it will likely become law unless Congress and the President sign a joint resolution nullifying it, which rarely occurs.
D.C. employers now have two options: they can quickly act to have employees without non-competes enter into them before this becomes law, as pre-existing agreements are at least arguably still enforceable, or they can get a jumpstart in reviewing their employment agreements, policies, and restrictions agreements and taking out non-competition and other moonlighting provisions.
Meredith S. Campbell
Chair, Employment and Labor Group
Co-Chair, Corporate Investigations, Governance and Risk Management T(301)255-0550, Employment and Labor Group
