D.C. Non-Compete Ban Effective Soon: Update Your Non-Compete Agreements and Workplace Policies Now

Labor & Employment @lert

Date: February 05, 2021

The District of Columbia’s Ban on Non-Compete Agreements Amendment Act of 2020 could go into effect as soon as February 24, 2021. However, it is not retroactively effective, so employers are encouraged to update and revise any such agreements as soon as possible prior to the effective date.

What Does the Act Prohibit?

Once in effect, employers may not have a “non-compete provision” that prohibits employees from simultaneous or subsequent employment by another person. The ban applies to all employers that operate in D.C. without regard to size, as well as to any employee who performs work in D.C., and any prospective employee whom the employer “reasonably anticipates” will do so. It contains very limited exceptions for volunteers, certain physicians, babysitters, and religious employees.

The ban is among the strictest in the nation with its prohibitions on restricting even simultaneous employment. Employers will not be able to prevent employees from simultaneously working for a competitor, operating their own competing business, or performing work or services for another person. Employers will also be prohibited from maintaining workplace policies—written or unwritten—with similar restrictions.

Employers may still maintain non-disclosure and confidentiality provisions and policies, which will have renewed importance after the ban goes into effect. The ban also does not apply to non-solicitation covenants.

Finally, the act imposes certain penalties, and prohibits retaliation against an employee for asking about non-competes or for refusing to sign one.

Other Administration Requirements

The act imposes an affirmative duty to notify new and current employees, in writing, of the ban within 90 days of its effective date. Thereafter, new employees must be provided this notice within 7 days of the commencement of employment, and the employer must provide the notice within 14 days of any request by an employee. The act contains specific notice language: “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.”

What is the Effective Date?

The earliest the new act could go into effect, assuming no action by Congress, is February 24, 2021. However, the exact date is unknown due to the D.C. Home Rule Act, which mandates a 30-day waiting period that is calculated by excluding certain holidays and recesses of Congress. Currently, the Senate has a recess planned for the entire week of February 15, 2021, that if actually taken, could push back the effective date.

A Growing Trend?

The D.C. Ban on Non-Compete Agreements Amendment Act of 2020 appears to be a continuation of a trend of legislation regarding noncompete agreements. D.C. neighbors, Virginia and Maryland, have new laws of their own on this topic and more jurisdictions may join in. Even those jurisdictions which currently allow restrictive covenants often have exclusions for certain occupations, employees, or job types. Always check with counsel to ensure that your non-compete agreement is updated and enforceable.

What Should Employers Do Now?
  • Analyze your workforce and determine whether there are any employees who should have an agreement, but do not. If so, institute those immediately prior to the effective date of the new act.
  • Update your restrictive covenant agreement if you have employees currently in D.C. or anticipate that you may have employees working in D.C. in the future to ensure compliance.
  • Update workplace policies located in the handbook or elsewhere to ensure compliance.
  • Consider strengthening non-solicitation and non-disclosure covenants to protect your business in light of the upcoming ban on non-compete covenants. Ensure that any such agreement has the proper notice under the Defend Trade Secrets Act of 2016.
  • Institute the act’s notice language in the new hire packet or elsewhere and create a communication plan for existing employees.
  • Train HR and management in D.C. about the right of employees to request and timely receive information on their non-compete agreements and about the act’s non-retaliation provision.
FOR MORE INFORMATION

For more information, please contact:

Deborah S. Brenneman
513.352.6638
937.443.6600
Debbie.Brenneman@ThompsonHine.com

Sara Hamilton
404.407.3685
Sara.Hamilton@ThompsonHine.com

or any other member of our Labor & Employment group.

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