D.C. Employers: Have You Complied With the Non-Compete Clarification Amendment Act?

Employers with employees in the District of Columbia have until Monday, October 31, 2022, to comply with a specific notice provision contained in the D.C. Non-Compete Clarification Amendment Act of 2022 (B24-0256) (the “Amendment”).

Non-Compete Provisions and Express Exceptions

As we previously wrote, the Amendment scales back the initial D.C. Ban on Non-Compete Agreements Amendment Act of 2020. While the Amendment still prohibits employers from binding most employees to non-compete agreements, employers may still enter into non-compete agreements with

1. “highly compensated employees,” i.e., those who are reasonably expected to earn at least $150,000 per year in total compensation from the employer; and
2. “medical specialists,” i.e., licensed physicians who receive at least $250,000 in total compensation per year from the employer.

Importantly, the Amendment also exempts from the law non-compete provisions that:

1. are contained within an agreement between the buyer and seller of a business;
2. constitute policies meant to prohibit moonlighting, conflicts of interest, the disclosure or misuse of confidential or proprietary information, or violations of D.C. or federal laws, regulations, contracts, or grant agreements; and
3. provide a long-term incentive.

Required Notices

Importantly, covered employers that have policies exempted from the law (e.g., anti-moonlighting, confidentiality, and/or conflict of interest policies and certain long-term incentive plans) must provide their D.C. employees with a written copy of these provisions:

1. by October 31, 2022;
2. within 30 days of an employee’s acceptance of employment; and
3. any time the policy changes.

Further, to the extent that an employer intends to enter into a non-compete provision with a highly compensated employee or medical specialist after October 1, 2022, the employer must provide the non-compete provision to the individual at least 14 days before the individual begins working for the employer; or, if the individual is already employed by the employer, at least 14 days before the employee executes the agreement. The employer must also provide the following notice, verbatim, to the individual:

The District of Columbia Ban on Non-Compete Agreements Amendment Act of 2020 limits the use of non-compete agreements. It allows employers to request non-compete agreements from “highly compensated employees” under certain conditions. [Name of employer] has determined that you are a highly compensated employee. For more information about the Ban on Non-Compete Agreements Amendment Act of 2020, contact the District of Columbia Department of Employment Services (DOES).

Contents of a Valid Non-Compete

For a non-compete agreement with a highly compensated employee or medical specialist to be valid and enforceable, the agreement must specify:

1. the “functional scope” of the non-compete, including the services, roles, industry, or competing entities from which the individual is restricted performing work;
2. the “geographical limitations” of the work restriction; and
3. the time period of the restriction following the employee’s separation, which is not to exceed (a) 365 calendar days (1 year), if the employee is not a medical specialist; or (b) 730 calendar days (2 years), if the employee is a medical specialist.

Conclusion

Employers with any employees working in the District of Columbia (whether out of an established office or remotely from their homes) must comply with the Amendment.  Therefore, if you have employees in the District, you must:

1. provide notice of any anti-moonlighting, conflict of interest, or confidentiality policies to your current employees by October 31, 2022, and to any new hires within 30 days of their acceptance of employment;
2. remove all non-compete provisions from your standard offer letters, employment agreements, and employee policies, unless the affected employees make $150,000 or more annually;
3. ensure that any upcoming non-compete provisions with highly compensated employees and/or medical specialists conform to the requirements in the Amendment (non-compete agreements entered into prior to October 1, 2022 are unaffected by the law); and
4. provide appropriate notice to highly compensated employees and/or medical specialists with whom you intend to bind to non-compete provisions.

Please contact the author or another EBG attorney for assistance with complying with these new restrictions and notice requirements.