This summer, D.C. Mayor Muriel Bowser signed into law the Non-Compete Clarification Amendment Act of 2022. This new provision significantly limits DC’s original ban on non-competition agreements and will take legal effect on October 1, 2022. Similar to laws in Maryland and Virginia, this law will focus on income thresholds to determine the enforceability of non-competition agreements. If employers are not aware of this development, they may be asking employees to sign non-competes that could be unenforceable.
Four Key Takeaways On This New Law:
- The law only applies to employees who spend or are expected to spend more than half of their time working in DC, and it excludes “highly compensated employees.”
- “Highly compensated employees” are defined as individuals who are expected to earn $150,000 or more annually, including bonuses, commissions, overtime pay and vested stock. The law imposes notice requirements and limits the duration and terms of non-compete agreements for workers who qualify as highly compensated employees.
- If an employer has a policy that restricts an employee’s use or disclosure of confidential or proprietary information or prohibits an active employee from working for someone other than the employer while he/she is employed, the employer must provide a written copy of the policy to the employee within 30 days after the employee accepts employment, and within 30 days after October 1, 2022.
- The law does not prohibit employers from having non-solicitation agreements with employees.
The law is not retroactive and will not impact the enforceability of agreements entered into prior to October 1, 2022. However, for any new agreements on or after October 1, 2022, employers must ensure the contents of the agreement satisfy the new requirements and restrictions. This is a major change in the law for companies employing individuals in the District of Columbia, so companies and managers should stay on top of this new development. Otherwise, they will run afoul of D.C. law and could have non-compete agreements put in place that will no longer be enforceable.