On December 15 2020, the D.C Council joined a growing number of other jurisdictions that have enacted legislation limiting the use of non-compete agreements. The new law, known as the “Ban on Non-Compete Agreements Amendment Act of 2020 (the “Act”), effectively prohibits employers from entering into, or enforcing, non-compete agreements. The Act will still require Congressional approval before it officially goes into effect.
The Act would preclude the use of non-compete agreements within a particular geographic area or for a period of time. However, an otherwise lawful provision that restricts an employee from disclosing the employer’s confidential, proprietary information, customer lists or trade secrets is still enforceable. Agreements made between the seller of a business and one or more buyers of that business restricting the seller’s ability to compete will still be enforceable. In addition, specific exemptions exist for “medical specialists” which include licensed physicians who have completed a medical residency and are earning at least $250,000 per year.
It remains to be determined whether the Act will allow for enforcement of non-solicitation agreements designed to prevent an employee from directly, or indirectly, poaching customers and clients of the former employer. Although the Act does not expressly prohibit the use of non-solicitation agreements, there is confusion since the Act also does not expressly preserve the right of a former employer to enforce a non-solicitation agreement.
There is an exception for agreements already in place. Accordingly, for employers operating businesses in D.C. that have non-compete agreements in place prior to the effective date of the Act, such agreements will still be enforceable. Employers desiring to put such agreements in place are encouraged to act promptly, while also making sure that the terms and conditions of such agreements comport with other, pre-existing, limitations.
Going forward, employers should still give strong consideration to requiring employees to sign properly drafted confidentiality and non-disclosure agreements to protect the employer’s proprietary information and trade secrets. Subject to how the Act is interpreted, the use of non-solicitation provisions is also encouraged.
For more information about this and how we can assist your business, please contact Ronald Lyons at firstname.lastname@example.org or 240-778 2306.