On October 1, 2022, the District of Columbia’s ban on non-compete agreements (D.C. Code § 32-581.01 – .05) went into effect after some legislative speedbumps. The law imposes broad restrictions on employers use of non-compete agreements. Employers may not require or even request that an employee sign a non-compete agreement unless it is covered by one of the below listed exemptions. Non-compete agreements entered into after October 1, 2022, are automatically void under the new law.
Scope. In a nutshell, the law covers all employees who spend over 50% of their work time in the District. (There are some nuances to this definition but this generally sums it up.)
Exceptions. “Highly compensated employees,” defined as employees earning $150,000 or more annually, are exempted from the law. Also exempted are medical specialists earning more than $250,000 per year, and babysitters. Starting in January 2024, these threshold figures will be adjusted in recognition of average wage increases.
Religious officials and unpaid volunteers were excluded from coverage in the 2020 law; the 2022 amendment restores coverage to these employees.
Permissible provisions. The law expressly states that the following are not considered “non-compete provisions” and are therefore not prohibited by this law:
- An agreement between a buyer and a seller of a business, where the seller agrees not to compete with the buyer’s business
- An agreement restricting the dissemination of the employer’s confidential or proprietary information
- An agreement restricting an employee from moonlighting at another job where the employer reasonably believes that holding the second job will:
- Result in the employee disclosing confidential or proprietary information
- Violate the employer’s, industry’s, or profession’s conflict of interest rules
- Constitute a conflict of commitment in the case of higher education employees
- Impair the employer’s ability to comply with applicable laws, a contract, or a grant agreement
- Long-term incentive agreements
Anti-Retaliation. The law also contains anti-retaliations provision.
Enforcement. An employee may file an administrative complaint with the Mayor’s office, or a lawsuit in a private right of action.
Exposure. Violations of the law may result in administrative fines of $350 to $1,000, per violation, which escalate for repeat offenders. In addition to administrative fines, the employer may be liable to the employee for between $500 and $1,000 per employee, again escalating for second offenses and beyond. This includes violations of the prohibition against requesting or requiring employees to sign non-compete agreements. Employees who bring private causes of action may also recover attorneys’ fees.
Employers considering asking their employees to sign traditional non-compete agreements as part of their onboarding process should contact an attorney to ensure they do not run against this law. Carr Maloney has experienced attorneys who can help guide you through this process. Please reach out to any of our partners in our Employment and Labor Law Practice Group: Thomas L. McCally, Nat P. Calamis, Tina M. Maiolo