The District of Columbia Revises Ban on Non-Competes

On July 27, 2022, Mayor Muriel Bowser signed into legislation the Non-Compete Clarification Amendment Act of 2022, scaling back specified features of D.C.’s first Ban on Non-Contend Agreements Amendment Act of 2020. As we previously reported, the unique ban included some of the most substantial non-compete constraints in the region, which includes prohibiting the use of non-compete agreements for just about all employees doing work in D.C. and banning anti-moonlighting guidelines. Below are some essential takeaways from the Modification:

Scope: The Modification defines a non-contend provision as “a provision in a prepared agreement or a workplace policy” (both prepared and people executed as a matter of follow), “that prohibits an personnel from performing operate for yet another or from working the employee’s own business enterprise.”

Which workforce are excluded from the non-contend ban? The Modification permits non-contend provisions for “medical specialists,” outlined as accredited physicians who have completed a clinical residency, are generally engaged in the shipping of professional medical services, and make at minimum $250,000 a 12 months as perfectly as “highly compensated workforce,” defined as folks predicted to make $150,000 or additional every year. The Modification specifies that payment involves wage, hourly wages, bonuses, commissions, extra time spend, vested inventory and other cash flow “provided on a frequent or irregular basis.” Also, the Amendment adds useful facts pertaining to which non-really compensated staff members are protected, including workforce who both i) invest far more than 50% of their time performing in D.C., or ii) devote a substantial quantity of their perform time for the employer in D.C. and do not commit additional than 50% of their operate time in one more jurisdiction.

What is expected from businesses for permissible non-compete agreements? The Modification imposes a observe necessity for non-compete agreements to be enforceable. Specifically, the agreement need to be provided to the personnel in producing at the very least 14 times prior to commencing work or, if the staff is already employed, at minimum 14 days prior to the date the worker must execute the agreement. Also, the agreement will have to:

• Specify the services, roles, business, or competing entities the personnel is limited from undertaking do the job in or on behalf of
• Specify the geographical limits of the do the job restriction
• Limit the non-compete arrangement to a a single 12 months expression from the date of separation or a two-12 months term for clinical expert

The employer ought to also supply the adhering to particular observe when a non-contend is proposed to an staff:

“The District of Columbia Ban on Non-Compete Agreements Modification Act of 2020 limitations the use of non-contend agreements. It lets businesses to ask for non-compete agreements from “highly compensated employees” below certain circumstances. [Name of employer] has established that you are a really compensated employee. For far more facts about the Ban on Non-Compete Agreements Amendment Act of 2020, speak to the District of Columbia Office of Work Expert services (DOES).”

What provisions are excluded from the non-compete ban for protected staff members?

• Defense for employers’ confidential and proprietary information: The modification clarifies that businesses may perhaps reduce personnel from disclosing, making use of, selling, or accessing an employer’s private or proprietary data either for the duration of or just after work.
• Specific anti-moonlighting limitations permitted: The modification permits anti-moonlighting provisions in conditions wherever outdoors employment could end result in a conflict of interest or outcome in the disclosure or use of the employer’s confidential or proprietary information.
• Exception for lengthy-time period incentive options: The modification permits non-compete provisions to be integrated in extensive phrase incentive options, which includes bonuses, fairness payment, and inventory possibilities.
  • If an employer believes that any staff falls in just the aforementioned exceptions, they must present this kind of workers with a penned copy of the appropriate provisions both by Oct 31, 2022, or inside 30 days of acceptance of work for freshly hired workers, and any time the coverage modifications.

The amended ban went into influence on Oct 1, 2022, even though it will not be utilized retroactively. So, beginning October 1^st, businesses in D.C. must ensure that their non-compete agreements and employment insurance policies comply with the Amendment’s needs for applicable staff members. Further, the Modification reiterates that an employer could not retaliate in opposition to an staff for refusing to concur to a non-compete, refusing to abide with an illegal non-compete provision, or for inquiring or complaining about the validity of a provision. Accordingly, companies need to make certain that pertinent managers and human methods staff are thoroughly experienced with regards to the anti-retaliation provisions of the Amendment.