A new D.C. law, which will be effective around October 1, 2021, prohibits employers from requiring or requesting that any covered employee sign an agreement that includes a non-compete provision, and renders all non-compete provisions entered into after the law’s effective date unenforceable. Other key provisions in the new law include:
- Employers must not institute workplace policies, such as anti-moonlighting rules, that limit employees’ ability to work for other people or start their own business while working for them.
- Employees are protected from retaliation by the employer if they refuse to agree to non-compete provisions or complain about provisions or workplace policies they reasonably believe violate the prohibition.
- Employers must provide written notice to employees about their rights under the new law.
The D.C. government and individual employees aggrieved by violations of the new law have the power to bring enforcement actions against employers in either an administrative proceeding or in court. Employers found liable for violations of the new law can be ordered to pay affected employees from $500 to $2,500 for first violations, and over $3,000 for subsequent violations.
The new law only applies to non-competes entered into after the effective date; it is not retroactive. So, existing non-compete agreements will be enforced and interpreted under existing D.C. law.
The law covers almost any employee who performs any work within D.C., but only applies to private employers. There are important exceptions to the new law.
- Volunteers in educational, charitable, religious, or nonprofit organizations;
- Lay members elected or appointed to office within a religious organization who are engaged in religious functions; and
- Casual babysitters working at or around the employer’s residence.
Limited protections are given to “medical specialists,” i.e., licensed physicians practicing medicine and earning more than $250,000 annually. The new law does not prohibit non-compete agreements for such medical specialists; however, it requires employers to give the covered physicians at least 14 days to review the provision before execution of the agreement.
Importantly, the new law still permits employers to enter into confidentiality agreements with employees in order to protect confidential, proprietary, or sensitive information, customer lists, and trade secrets. Also, the new law permits non-compete agreements between sellers and buyers made in connection with the sale of a business.
The D.C. law compares favorably with similar prohibitions on non-competes in California and Oklahoma. Maryland and Virginia have laws that prohibit non-competes from applying to lower wage earners ($31,200 in Maryland and $62,408 in Virginia).
The new law impacts all private employers that have D.C. employees. On the one hand, this change may inspire many employers to move employees out of the District, while, on the other hand, employees may clamor to work in D.C. to avail themselves of the new protections. Query how this change affects those who work remotely full-time or part-time. Many years ago, I remember being asked to sign a non-compete by a major accounting firm, which was enforceable under New York law. Today, that firm and others will be prevented from binding their D.C.-based employees to such a provision.