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Volume XII, Number 184

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District of Columbia Bans the Enforcement of New Non-Compete Agreements

On December 15, 2020, the District of Columbia Council unanimously passed the Ban on Non-Compete Agreements Amendment Act of 2020, under which the District of Columbia joins California and a small handful of jurisdictions across the country that have prohibited the enforcement of covenants not to compete.

The new law began as an effort to limit the enforcement of non-compete agreements against low wage employees, but on December 1, 2020 was amended to prohibit non-competes against all virtually all employees who perform work in D.C.  The primary exception to the prohibition is for “medical specialists,” defined as licensed physicians who have completed a medical residency and are paid at least $250,000 per year.  Non-compete agreements may continue to be enforced against medical specialists, so long as certain procedural requirements are followed prior to the agreement’s execution.  In addition, non-compete agreements entered by the sellers of a business in connection with the business’ sale remain enforceable.  Importantly, however, the new law also prohibits employer policies that forbid employees from working for competitors during the employment relationship.

Although non-compete agreements are prohibited, confidentiality or non-disclosure agreements protecting confidential and proprietary information and trade secrets are still enforceable.  The new law is less clear, however, whether non-solicitation agreements that prohibit employees from working with the employer’s customers or recruiting its employees are enforceable.  Many employers use non-solicitation agreements to impose a more limited restriction that prevents a departing employee from abusing a customer relationship.  The language of the law does not appear to prohibit non-solicitation agreements, but, unlike similar non-compete prohibitions in other states, the law does not expressly preserve the enforceability of non-solicitation agreements.

D.C. employers that rely on non-compete agreements should take the following steps:

  • The new law’s prohibitions on the enforcement of non-compete agreements are not applicable to pre-existing agreements entered prior to the effective date of the law (which Polsinelli estimates will become effective in late February after congressional review).  Accordingly, employers that do not have covenants not to compete with their D.C. employees should consider now whether they wish to implement these agreements.

  • Ensure on a going forward basis that employees entering positions that would typically be required to execute a non-compete are instead required to sign confidentiality and non-solicitation agreements instead. 

  • Hospital and other medical employers should update their onboarding processes for physicians to ensure that the physician is provided with any non-compete agreement and the other information required by the law sufficiently in advance to satisfy the new law’s requirements.

  • Review existing “moonlighting” policies and, if necessary, modify them to comply with the new law.

In addition to rendering non-competes void and unenforceable, the new law also provides employees with a private right of action to recover attorney’s fees and statutory remedies of $500 to $3,000 per violation in cases of prohibited agreements.  The D.C. government can also bring enforcement actions.

Finally, the law also prohibits retaliation against employees who seek to exercise their rights under the act or oppose illegal agreements.

© Polsinelli PC, Polsinelli LLP in CaliforniaNational Law Review, Volume X, Number 356
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About this Author

Shareholder

Tony Torain is committed to providing reliable counsel to strategically solve client matters and address their litigation needs. He represents companies in connection with all types of employment and labor disputes, including wrongful discharge and claims based upon:

  • The National Labor Relations Act
  • Title VII of the Civil Rights Act
  • The Americans with Disabilities Act
  • The Age Discrimination in Employment Act
  • The Family and Medical Leave Act
  • The Fair Labor Standards Act
  • The Occupational Safety and Health Act...
202.626.8378
Jack Blum Polsinelli Employment Attorney
Associate

Jack Blum is an associate in the firm’s Employment Disputes, Litigation, and Arbitration practice, where he represents employers in connection with a wide range of employment law issues. Jack has extensive experience in defending employers against claims by their employees in federal and state courts, as well as before government agencies like the EEOC, Department of Labor, and state human rights commissions. Jack aggressively defends his client’s personnel practices and decisions while not losing sight of their underlying business goals and objectives. Jack represents clients in all...

202.772.8483
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