In an effort to expand job opportunities for workers, the District of Columbia has passed the Ban on Non-Compete Agreements Amendment Act of 2020 (the “Act”). The Act took effect on March 16, 2021 and applies to all D.C. employees and most employees working in D.C., regardless of how much the employee earns. D.C. has already prohibited post-termination non-compete agreements and this Act goes a step further by targeting non-compete clauses that prohibit workers from simultaneously or subsequently (1) pursuing employment similar to their current role, (2) working for another employer who competes against their current employer, or (3) operating their own business. If an employee is asked to sign a contract with these non-compete terms after March 16, 2021, the Act prohibits the employer from enforcing that clause against the employee.
The unique aspect of this law is that it appears to allow an employee to hold another job during their employment, even another job with a direct competitor. This runs counter to the widely understood belief that an employer can require its employees’ full time and attention during employment and could therefore lawfully restrict the employee from simultaneously working for a competitor.
However, under the Act employers are permitted to protect their legitimately sensitive business information. An employee may still be required to sign an agreement that prevents the employee from disclosing (1) confidential, proprietary, or sensitive information, (2) client lists or customer lists, and (3) trade secrets. The employer must make sure that any such agreement protecting sensitive information cannot also restrict an employee’s access to new or other employment opportunities. Additionally, the Act does not prohibit non-solicitation agreements and permits non-compete provisions that are contained within or executed contemporaneously with an agreement between the seller and buyer of a business to prevent unfair competition by the seller.
Because the Act bans the use of non-compete provisions between any employer “operating in the District” and any employee who “performs work in the District,” it is unlikely that employers will be able to circumvent the Act by inserting choice of law provisions providing that another state’s laws govern the agreement.
Because almost all employees performing work in DC will be affected by this new law prohibiting employers from enforcing “no outside employment” and “no moonlighting” policies, businesses with workers in the District of Columbia must review and revise any existing offer letters, employment and other restrictive covenant agreements, and workplace policies that restrict certain activities covered by non-compete provisions while also making sure to protect their confidential and trade secret information.
Here at Liff, Walsh and Simmons, my colleagues and I have helped many business owners determine their best course of action regarding employment policies and regulations. If you have questions about a particular employment law issue, or would like more information, email me at Jcrossan@liffwalsh.com or call me direct at (443) 569-7264.
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Liff, Walsh & Simmons is a business law firm. We provide expert, responsive legal services to middle-market businesses, their owners, operators, and investors across the mid-Atlantic region. Our attorneys are subject matter specialists in business counseling, contracts and transactions, commercial and civil litigation, real estate, employment, banking and finance, real estate, land use, zoning, and estate planning and administration.