Recently, District of Columbia Mayor, Muriel Bowser, signed “The Ban on Non-Compete Agreements Amendment Act of 2020” also referred to as “the Act.” D.C. is not the first territory, state, or municipality to limit or ban non-compete agreements. However, the new D.C. rule, once applicable, will limit non-compete agreements more so than laws in any other U.S. jurisdiction. Although there are a few exceptions, the Act will require most D.C. employers from including non-compete agreements in employment contracts or utilize workplace policies that bar employees from simultaneously working for a competitor employer. Further, the Act also requires D.C. employers to be aware of new non-retaliation requirements as well as penalties for non-compliance with the rule.

The Act covers all non-compete provisions and policies that prohibit employees from being “simultaneously or subsequently employed by another person, performing, working, or providing services for pay for another person, or operating the employee’s own business.” While the breadth of the Act severely limits employers, the Act does not ban employers from requiring employees to sign confidentiality agreements or utilizing policies that prohibit an employee from discussing information that is “confidential, proprietary, or sensitive information, client list, customer list, or a trade secret.” Additionally, the Act does not invalidate any non-compete agreements that were created before the new law is applicable. Finally, though the law covers many topics related to non-compete agreements, the Act does not touch on non-solicitation agreements—leading many to believe that employers will still be able to use these documents.

Important Clauses Within the Act

It is vital that employers understand the Act’s non-retaliation and penalty clauses. These clauses prohibit any kind of retaliation against an employee who (a) refuses to sign a non-compete agreement, (b) comply with a now-unlawful provision or policy, or (c) complains or requests information about a non-compete provision or policy. Employers who violate the law may be subject to administrative and/or civil penalties between $350 – $3,000 per violation.

Additionally, the Act requires employers to provide notice of the law: (1) to all employees within 90 days after the law becomes applicable; (2) to each new hire within 7 days of his or her start date; and (3) to an employee who requests information about the ban, within 14 days of the employee’s request. Further, the notice employers give to employees must read as follows: “No employer operating in the District of Columbia may request or require any employee working in the District of Columbia to agree to a non-compete policy or agreement, in accordance with the Ban on Non-Compete Agreements Amendment Act of 2020.”

The Act will become law after Congress’ 30-day legislative review period and publication in the District of Columbia Register. If during the 30-day review period Congress finds issues with the law, they can prevent the Act from becoming law if the President also agrees. Even if the Act does become law, it will not be applicable until its fiscal effect in included in an approved budget which will likely not happen until Fall 2021. This means employers will have a window of time to review and adjust their policies or request that current employees sign a non-compete agreement.

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