by Aron Zavaro, Esq.
Starting tomorrow, D.C.’s highly anticipated law restricting the use of non-compete agreements will take full effect. Back in 2021, D.C. passed legislation that essentially banned all non-compete agreements. However, the D.C. Council recently amended the law—the “Non-Compete Clarification Amendment Act of 2022”—and softened its previous stance against non-competes. The revised law, which goes into effect tomorrow, establishes the following restrictions on non-compete agreements:
- Covered Employees: Unlike the earlier version of the law, which applied to anyone who spent any time working for an employer in D.C., the new law provides a narrower definition of “employee” as anyone who (1) spends more than half of their working time in D.C., or (2) is based in D.C. and spends a substantial amount of their working time in D.C., and no more than half of such time elsewhere.
- Non-Competes Allowed for Highly Compensated Individuals: The new law creates an exception for employees who earn at least $150,000.00 a year (unless they are a medical specialist, in which case the cutoff is $250,000.00). These “highly compensated individuals” may be subject to noncompete agreements.
- Limits on Non-Compete Provisions: In order for a non-compete to be enforceable, it must:
- last for no longer than 1 year;
- specify a geographic scope;
- specify the “functional scope” of the agreement—i.e., the “services, roles, industry, or competing entities the employee is restricted from performing work in or on behalf of”;
- be given to the employee at least 2 weeks before the start of their employment.
- Ban on Moonlighting: Originally, the legislation made it unlawful for an employer to prohibit outside employment. However, after receiving pushback, the law was amended and now states that employers are allowed to ban outside employment as long as the employer “reasonably believes” that the employee’s outside employment would:
- Result in the employee’s disclosure or use of confidential employer information or proprietary employer information;
- Conflict with the employer’s, industry’s, or profession’s established rules regarding conflicts of interest;
- Constitute a conflict of commitment if the employee is employed by a higher education institution; or
- Impair the employer’s ability to comply with District or federal laws or regulations; a contract; or a grant agreement.
If you have questions about non-compete agreements, contact Thatcher Law Firm at 301-441-1400 on online at www.ThatcherLaw.com. Follow us on: