The District of Columbia recently adopted the Non-Compete Clarification Amendment Act of 2022 (the “Act”), which significantly revises the near-total ban on employee non-compete provisions originally enacted in 2021 but never implemented. The revised law, expected to take effect on October 1, 2022, is one of the strictest non-compete laws in the nation.
The law applies to employers in D.C., but also employers based outside of D.C. that employ workers in the District. The Act does not apply to partners in a partnership.
While the Act prohibits agreements or policies that restrict an employee’s ability to work for others or for themselves during or after employment, it creates an exception for non-compete agreements for “highly compensated” employees when certain substantive and procedural requirements are met. “Highly compensated” employees are generally defined as those who earn at least $150K/year (or $250K/year for “medical specialists (i.e., licensed physicians).
Enforceable non-compete agreements for highly compensated employees must generally:
- Last no longer than 365 days post-employment;
- Specify the geographic scope of the limitation;
- Specify the scope of the restriction (i.e., the services, roles, industry, or entities the employee is restricted from performing work on behalf of); and
- Be given to the employee at least 14 days before the start of employment, or, in the case of a current employee, 14 days before the agreement must be signed.
Importantly, the Act does not prohibit agreements between employee and employer addressing confidentiality, non-solicitation, anti-moonlighting, or conflicts of interest.
What to do now?
Employers whose workplace policies include any of the above provisions must provide such policies to employees in writing:
- Within 30 days of an employee’s (or prospective employee’s) acceptance of employment with the employer;
- Within 30 days after October 1, 2022; and
- Any time such policies change.
THIS ACT IS NOT RETROACTIVE! Thus, employers need not amend non-compete agreements executed prior to October 1, 2022. And, for those D.C. employers who wish to enact non-compete agreements, they should do so before October 1, 2022.
To discuss how to protect your business and the impact this Act could have on your workforce, please contact any of our RKW lawyers.
