May 26, 2020

May 26, 2020

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Proposed D.C. Non-Compete Legislation Would Prohibit the use of Non-compete Agreements for Many Employees

The D.C. council is considering legislation that would prohibit the use of non-compete provisions for entry level and moderate-income employees, and would apply to D.C. workers that earn up to three times the minimum wage, currently equal to $87,654 annually.   

The proposed legislation, entitled “The Ban on Non-Compete Agreements Amendment Act of 2019” (the “Act”), defines a “non-compete provision” as a: “[T]erm of a written agreement between an employer and an employee that restricts or bars the employee form being simultaneously or subsequently employed by another employer: (A) In a particular geographic region; or (B) For an indefinite or specified period of time”. Significantly, this language indicates that the Act would prohibit such non-compete restrictions on covered employees both during and after employment.

In addition, the Act, would prohibit restrictive language from being included in a company policy or employee handbook. The Act will not apply to existing agreements, only to those entered into on or after the effective date of the Act. 

According to Councilmember Silverman, who introduced the legislation, “…non-compete agreements are particularly unfair for low-wage workers and contribute to income inequality in our city.” The Act stems from recommendations made by President Barack Obama in the State Call to Action on Non-Compete Agreements issued in 2016. 

Employers that violate the Act would be subject to a fine ranging from $500 to $2,000, depending on the nature of the violation.  The greatest fine will be imposed on employers who retaliate against workers for asking about their rights under the Act, or filing a complaint in connection with the Act.

As the Act is currently written, a number of questions remain for employers:

  • What happens with regards to non-compete agreements for employees who are initially above the monetary threshold, but subsequently fall below the threshold because it rises faster than their wages?

  • How would the Act apply to employees in tipped or commissioned positions, whose annual income may fluctuate?

  • What happens in the case of employees that receive a raise during the year, putting them above the monetary threshold? Can the employer get them to sign a non-compete agreement at that time?

  • How will employers handle potential backlash from certain tenured employees with non-compete provisions and their subsequently hired counterparts who are not subject to non-compete provisions?

We will continue to monitor the legislation and issue a follow up post if and when the Act is passed into law.  In the meantime, employers may want to revise or strengthen their non-solicitation and/or confidentiality provisions, which do not appear to be implicated by the Act.  In addition, employers should consider their approach to non-competes generally and, especially, whether they are necessary for employees at income levels covered by the Act.

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About this Author

David Barmak, Employment Attorney, Executive Advisor, Mintz Law FIrm
Member / Chair Emeritus, ELB Practice

David is an experienced trial lawyer and trusted advisor to businesses and their executives with a focus on employment law and HR issues. He has litigated hundreds of cases in federal and state courts and arbitrations nationwide. David is devoted to helping clients accomplish their compliance, risk reduction, and employee relations objectives. David has written and lectured extensively on employment law, trial practice, and alternative dispute resolution, and is often quoted in the media.

As a trial lawyer, David has handled hundreds of cases...

Jennifer Budoff Employment Lawyer Mintz Levin

Jennifer provides clients with representation and counsel on a broad range of employment matters. She has significant experience defending employers in discrimination, retaliation, harassment, and wrongful termination claims in state and federal court, including the representation of employers in actions before Administrative Agencies.

In addition, Jennifer has substantial experience counseling management and human resource professionals on a broad range of workplace issues. In this regard, she regularly advises clients on best practices to minimize the risk of litigation and exposure, including monitoring and advising on changing employment legislation, and providing training for managers and employees on sexual harassment and discrimination in the workplace.

Jennifer also conducts internal investigations related to employment misconduct issues, prepares and updates employment policies and handbooks, negotiates employment and severance agreements, and assists in reductions in force and the onboarding of new employees.

Prior to joining Mintz, Jennifer was senior counsel in the Washington, DC and New York offices of a large law firm where she practiced employment law, commercial litigation, and professional liability.