District of Columbia: Ban on Non-Compete Provisions Scaled Back

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APPLIES TO

All Employers with District of Columbia Employees

EFFECTIVE

October 1, 2022

 

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(888) 378-2456

Washington, D.C. employers preparing for the implementation of the Ban on Non-Compete Agreements Amendment Act of 2020 now need to reevaluate their positions. While the original act banned nearly all non-compete agreements, the D.C. Council recently passed the new Non-Compete Clarification Amendment Act of 2022 allowing for certain exceptions.  

 

The Amendment now allows employers to enter into non-competes with almost any employee whose total compensation is or is reasonably expected to be more than $150,000 per year in addition to medical specialists making more than $250,000 per year. Bonuses, commissions, overtime premiums, vested stock, and other payments provided on a regular or irregular basis may be included in the total compensation calculation. The threshold will increase based on the consumer price index in the Washington Metropolitan Statistical Area beginning on January 1, 2024.  

 

The employee or prospective employee must also spend more than 50% of their work time in D.C.  or the employer must be based in D.C. with the employee regularly spending a substantial amount of work time in D.C. (no more than 50% of work time can be spent working in another jurisdiction). Note that there is no required salary threshold for employees who work for television, radio, cable, satellite, or other broadcasting stations or networks, excluding sales representatives. 

 

Non-competes executed on or after October 1, 2022 with qualifying employees must include the following to be enforceable: 1) specify the functional scope of the restriction, including services, roles, industry, or competing entities the employee is restricted from performing work in or on behalf of; 2) describe the geographical limitations of the restriction; and 3) limit the duration of the restriction to no more than 365 days from the separation date. The non-compete must be provided 14 days before the start of employment or the execution of the agreement. At the time the non-compete is provided, employers must also provide the following notice: 

 

The District of Columbia Ban on Non-Compete Agreements Amendment Act of 2020 limits the use of non-compete agreements. It allows employers to request non-compete agreements from “highly compensated employees” under certain conditions. [Name of employer] has determined that you are a highly compensated employee. For more information about the Ban on Non-Compete Agreements Amendment Act of 2020, contact the District of Columbia Department of Employment Services (DOES). 

 

The Amendment includes a few other notable exceptions from the original near total ban on non-competes. The buyer of a business can still insist that the seller not compete with the buyer. Employers can still otherwise prohibit employees from disclosing, using, selling, or accessing confidential or proprietary information. Anti-moonlighting provisions are also permissible with certain restrictions. Employers who have policies addressing any of these exceptions must update them for compliance and provide them in writing to employees by October 31, 2022 or within 30 days of acceptance of employment in addition to when changes are made to the policy. 

 

Action Items 

  1. Read the bill here. 
  2. Update procedures for implementing noncompete agreements. 
  3. Have noncompete agreements updated by legal counsel. 
  4. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance. 

  

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2022 ManagEase