Banning Bans on Competition: DC Passes Sweeping Prohibition on Non-Compete Agreements in the District

Jan 26, 2021 | Employment Law, Retaliation Law

This blog was co-authored by Leigh Anne St. Charles and Kaitlin Leary.

Mayor Muriel Bowser recently signed into law a new Ban on Non-Compete Agreements Amendment Act of 2020 for the District of Columbia. The new law, which will go into effect following a 30-day congressional review period, offers sweeping and unprecedented employee protection from restrictive workplace policies designed to prevent employees from engaging in employment deemed “competitive.”

In a time when employees are facing widespread terminations and lay-offs, legislation focused on stemming employer interference with the ability to earn a living is not, in itself, surprising. Indeed, DC’s neighbor Virginia passed its own ban on non-compete agreements for low wage employees eight months before DC, in April of 2020.

However, the District’s new non-compete ban goes far beyond the new Virginia law, and applies the ban on non-competes to virtually all employers “operating in the District.” Once it goes into effect, DC’s new law is poised to become one of the broadest bans on non-compete agreements in the country.

What Is a Non-Compete Agreement?

A non-compete agreement is a contract between an employer and an employee that prohibits the employee from working for a competitor of the employer for a certain period of time. Typically, non-compete agreements prevent an employee from competing against its former employer for a defined amount of time, within certain geographic limitations.

The new DC law, however, defines “non-compete provision” broadly to include any “written agreement between an employer and an employee that prohibits the employee from being simultaneously or subsequently employed by another person, performing work or providing services for pay for another person, or operating the employee’s own business.”

What Does the New Law Do?

In short, the Act prohibits any agreements or workplace policies that would prevent an employee from:

(1) Being employed by another person;

(2) Performing work or providing services for pay for another person; or

(3) Operating the employee’s own business.

Read literally, DC’s ban would not only prohibit any agreement or policy that prevents employees from engaging in certain work after leaving their job, but would also allow for outside employment while an employee is still working for their employer. Even California, which has long prohibited most non-compete agreements for subsequent employment, does not offer this protection to current employees.

In addition to prohibiting workplace policies and agreements with non-compete provisions, DC’s new law also prohibits employers from retaliating against employees for refusing to enter into unlawful non-compete agreements, or for asking or complaining about policies that the employee reasonably believes to be prohibited under the new law.

The ban is not retroactive, meaning that any non-compete agreements that were entered into prior to the law’s effective date would not be covered under the new law.

Who Is Covered by the Ban?

The DC non-compete ban applies to any employer operating in the District, except the DC government and the federal government. The ban also applies to all employees who perform work in the District, except for volunteers, elected or appointed members of religious organizations, casual babysitters, and licensed physicians earning at least $250,000 per year.

What Are the Penalties?

Employers who violate DC’s non-compete ban are subject to both administrative and civil liability, with fines of up to $1,000 for each violation. Employers found to have violated the non-compete ban are liable for relief payable to each employee for each violation, with the amount of relief dependent upon the type of violation.

Under DC’s new law, an employer faces liability of up to $1,000 per affected employee for maintaining or asking an employee to sign a prohibited non-compete policy, regardless of whether the employer actually attempts to enforce it. If the employer does attempt to enforce an unenforceable non-compete agreement, then the employer’s liability is increased to not less than $1,500 for each affected employee.

Employers that retaliate against employees for asking or complaining about, or refusing to enter into, an unlawful non-compete provision face liability of not less than $1,000 for each affected employee.

Further, penalties increase to not less than $3,000 for each affected employee for subsequent offenses by the employer.

What Can I Do as an Employee?

Once it goes into effect, the Act gives individuals whose rights have been violated the ability to file an administrative complaint or to proceed with an individual action in court.

Non-compete agreements can be used by employers as a powerful threat to keep employees from asserting their rights or taking action against their employer. No employee should be compelled to remain in a job simply because a non-compete agreement would force the employee to choose between relocation, giving up their chosen profession, or prolonged unemployment—period.

This is especially so where an employee is suffering harassment, discrimination, or other unlawful treatment. If you are considering staying in a job because of the threat of a non-compete provision, you should consult with an employment lawyer to understand your rights.