Non-compete reform continues to be a hot topic across the U.S. In addition to President Biden’s recent Executive Order and changes to Illinois law, Washington D.C. recently passed robust new legislation.
Passed in January 2021, and effective as of March 2021, Washington D.C. passed the “Ban on Non-Compete Agreements Amendment Act of 2020,” one of the broadest in the country. The new law bans non-compete clauses for the majority of employees and applies both during and after a worker’s employment. The law also prevents an employer from retaliating against an employee, and requires employers to provide notice of the new law on an employment poster. Additionally, the law allows for a private cause of action, meaning employees can file an affirmative lawsuit against an employer who violates the Act. The city’s mayor can also impose penalties on companies.
There are several types of agreements that the new law does not impact. Companies can still have confidentiality agreements, which require that the employee maintain sensitive information as confidential. The new law also does not impact non-solicitation agreements, which bar employees from conducting business with certain customers on the side or from hiring co-workers at a new business. And the new law does not apply to buy-sell agreements, in which individuals selling their business to another company agree to certain restrictions for a certain time period.
The new law, however, is not retroactive. So it does not apply to an agreement that an employee signed prior to January 2021. It also does not apply to certain volunteer workers or to certain medical specialists who earn a minimum of $250,000.
Because the new law does not apply to non-solicitation agreements, companies may try to use a non-solicit to circumvent the purposes of the new D.C. law. For example, a broad non-solicit clause can effectively be used as a non-compete. If a pediatrician (a) leaves a job, and is (b) prohibited from treating the children she has treated for the past decade, then the non-solicit is functionally equivalent to a non-compete.