As we previously reported, the District of Columbia (D.C.) was poised to issue a ban on non-compete agreements that was set to go into effect on October 1, 2022 and was expected to be delayed to, “ensure adequate deliberation over changes to the current law and to allow both D.C. government entities and businesses to have adequate time to prepare for the law’s enactment.” On July 12, 2022, the D.C. Council (Council) passed the Non-Compete Clarification Amendment Act of 2022, which among other things, lessens the almost universal ban on non-compete provisions to permit restrictions for highly compensated employees and medical specialists. This means that some D.C. employers will not need to void or discontinue use of their non-compete agreements.
Below are some of the key highlights of the amendments:
- Medical Specialists and Highly Compensated Employees. Permits non-competes for medical specialists making more than $250,000 per year and almost any employee whose total compensation is or is reasonably expected to be more than $150,000 per year.
- Covered Workers. Clarifies that the ban applies only to employees and prospective employees if they spend or are reasonably anticipated to spend more than 50% of their work time working in D.C., or their employer is based in D.C., and they “regularly” spend a “substantial amount” of work time in D.C. and not more than 50% of their work time working in another jurisdiction.
- Sale of Business Exception. Preserves the carve out for non-compete agreements entered into simultaneously with the sale of a business, allowing a buyer of a business to insist that the seller refrain from competing with the buyer.
- Continued Protection of Confidential and Proprietary Information. Employers may bar their employees from disclosing, using, selling, or accessing the employer’s confidential and proprietary information during or after employment.
- Moonlighting. Permits anti-moonlighting provisions if the employer reasonably believes the outside employment could result in the disclosure or use of the employer’s proprietary information; cause a conflict of interest; constitute a “conflict of commitment” for an employee of a higher education institution; or impair the employer’s ability to comply with federal or District laws or another contract.
Next Steps for Employers
Employers should be mindful the effective date of the law remains unchanged (October 1, 2022). Employers with workplace policies that meet any of law’s exceptions must provide the employee with a written copy of the provisions by October 31, 2022; or within 30 days of the employee’s acceptance of employment; and any time the policy changes.
Additionally, it is recommended that employers consult with their legal counsel to review any current non-compete agreements/policies utilized by the organization to ensure that they align with the requirements of this law.
HR Works will continue to monitor this topic and provide updated information as needed.
