On March 16, 2021, Washington D.C. passed The Ban on Non-Compete Agreements Amendment Act (“The Act”), a comprehensive ban on non-compete agreements similar to previous restrictions in California, Montana, North Dakota and Oklahoma. Here, the employment law attorneys at Eccleston and Wolf discuss the immediate effects on District employers.
Overview of the Act
The Act (i) prohibits employers from requiring or asking employees to sign a non-compete agreement or any other contract containing a non-compete provision, (ii) bans workplace policies that “have the effect” of acting as a non-compete agreement, and (iii) prevents any retaliation against employees for refusing to participate in a non-compete agreement.
It also prevents restrictions on “contemporaneous” employment, meaning that employers cannot restrict an employee from carrying on in concurrent employment or “moonlighting.” In an era of expanding participation in the “gig economy,” the Act as written would prevent a restaurant from prohibiting its delivery drivers from driving for UberEats or GrubHub on their off-time, etc.
The Act applies to all employers “operating in the District,” regardless of size, and includes only four limited classes of exempt employees: (1) volunteers, (2) employees of religious organizations, (3) a “casual babysitter,” and (4) a medical specialist earning $250,000 per year or more. A medical specialist earning $250,000 or more may only be subject to a non-compete agreement if it is provided for review fourteen (14) days prior to execution, and the individual receives a specific notice as included in the Act.
Effectiveness and Applicability Dates
The Act was passed and became “effective” on March 16, 2021. However, the applicability date, i.e. when the Act truly begins to affect the operations of District employers, is not yet certain. The Act’s applicability date is subject to its enrollment in an approved budget and financial plan, which could potentially occur at the beginning of the District’s fiscal year, October 1, 2021.
The Act does not govern agreements entered into prior to the applicability date, and such agreements will continue to be governed by D.C. common law. After the applicability date, any non-compete agreement or violative workplace policies are rendered void under the Act.
Notably, the Act does not include any provision which holds harmless workplace policies existing prior to the Act. Therefore, preexisting workplace policies that violate the Act could potentially be rendered unenforceable upon the applicability date.
Next Steps for District Employers
Now that the Act is effective, District employers should review their employment contracts, handbooks, policies and provisions to ensure compliance. Further, employers should adjust their onboarding process to include the Act’s notice provision, which requires that employers provide the following written notice to new and current employees:
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.
The notice must be provided to current employees no later than ninety (90) calendar days after the applicability date of the Act. As discussed above, the applicability date has not yet occurred, but prudent District employers should provide this notice to current employees as soon as possible.
In the future, the Act will require employers to provide the notice to all new employees within seven (7) calendar days after an individual is hired, and/or fourteen (14) days after an employer receives a written request for the statement from the employee.
Learn More With the Employment Law Attorneys at Eccleston and Wolf
At Eccleston & Wolf, our attorneys have extensive experience representing employers in a variety of industries across Maryland, Washington D.C. and Virginia. Now more than ever, remaining compliant with business practices is vital to protecting the health of your employees and the integrity of your business. If your business is facing litigation or potential litigation regarding such matters or other employment-related claims, whether initiated by an employee or otherwise, our team is here to assist you. For more information, contact your local Eccleston & Wolf office by clicking here: https://www.ecclestonwolf.com/contact-us/.