On January 11, 2021, the District of Columbia joined a handful of states, including its neighbors, Maryland and Virginia, in limiting employers’ ability to use “non-compete” agreements in order to restrict employees’ freedom to change jobs.
A “non-compete clause” is an agreement in which an employee agrees that, after leaving a job (or sometimes while still working for an employer), he or she will not work for a competitor or start a competing business. These agreements may have made sense long ago, when employees of small shops would open a competing shop across the street. For example, a medical practice that takes in a new, young doctor, may require that doctor to agree not to join a nearby competing practice once they develop their own patients. It’s easy to see why these agreements arose: owners who developed customers and trained new workers would not easily allow those workers to open a new business and take those customers with them.
The impact of these agreements on workers, however, is clear: an employee who spends time learning the skills of a business or profession will not be able to earn a living using those skills if he or she is prevented from doing so by a non-compete clause. Recently, employers have been insisting that low wage employees – janitorial or service employees – sign non-competes, which make them virtual prisoners in their jobs.
Some states have enacted legislation allowing these clauses if they are limited by time, geographic area, or industry. In Maryland and Virginia, an employer cannot require a low-wage worker to agree to this type of restriction. With the Ban on Non-Compete Agreements Amendment Act of 2020 (“Act”), the District of Columbia has gone beyond its neighbors and enacted even more comprehensive legislation. Starting February 10, if Congress doesn’t reject the law, no employer operating in the District of Columbia may request or require any employee working in the District (with limited exceptions) to agree to a new non-compete clause.
An employee under the Act is an individual who performs (or anticipates performing) work in the District on behalf of an employer. There are lots of exceptions: the Act does not apply to the federal or D.C. governments, charitable or religious volunteers, casual babysitters, or medical specialists who earn at least $250,000 per year. Moreover, the Act does not prohibit non-disclosure agreements, which prohibit employees from sharing their former employer’s proprietary or confidential business information with their next employers.
Significantly, in addition to banning any future non-compete agreements, the Act prohibits employers from taking adverse action against any employee who refuses to sign a non-compete agreement; fails to comply with an unlawful non-compete agreement; or who blows the whistle on the existence of such an unlawful policy.
If an employer violates the Act, the Mayor and Attorney General for the District of Columbia may fine non-compliant employers. The Act also allows employees to sue their employer for attempting to enforce a non-compete policy or for retaliating against them for complaining about the unlawful policy.
With the Ban on Non-Compete Agreements Amendment Act of 2020, the District of Columbia joins an elite group of states which prohibit almost all employers from requiring employees to agree to non-compete policies. If your employer has presented you with a non-compete agreement, or you have such an agreement and are looking to change jobs, the attorneys at Kalijarvi, Chuzi, Newman, & Fitch may be able to help.