District of Columbia Mayor Muriel Bowser has signed the Ban on the Non-Compete Agreements Amendment Act of 2020. This could prohibit covered employers from requiring that their employees sign an agreement that includes a non-compete clause. So, what is a non-compete agreement, and how will the ban affect employers and workers in D.C.?
Non-Compete Agreements: The Basics
Essentially, non-competes are contractual agreements where you agree to give up a right you would otherwise have in exchange for another benefit. Rule #1 of non-competes is that they have to be reasonable. This means that if there are too many restrictions or the terms limit the employee’s future options it will not be enforceable or recognized by the court.
Non-compete agreements should be limited in:
- Time: The shorter the agreement, the more likely a court is to enforce it.
- Area: Agreements should only apply to a limited geographical region where competition would truly undermine the business
- The definition of competition: Listing direct competitors or prohibiting the employee from starting their own business in direct competition should be a part of any non-compete agreement
Typically, non-compete agreements are signed by employees who have access to high-level company information. This information may be sensitive or include specific information about products, research, intellectual property, or other business details. If you are asked to sign a non-compete agreement, consult with an attorney immediately.
What Will the Ban Include?
The act will restrict employers and require them to modify employment policies instead of agreements. They will not be allowed to require or request that employees sign a non-compete provision, but it will not retroactively affect existing non-compete agreements.
The first part of the ban redefines an employer as “an individual, partnership, general contractor, subcontractor, association, corporation, or business trust […] or persons acting indirectly in the interest of an employer….”
An employee is “an individual who performs work in the District on behalf of an employer and any prospective employee….”
The act does not include a specific threshold for the amount of work performed by an employee or whether the employee must be physically present in the District.
How Will This Affect Office Policies?
The act includes specific guidelines regarding office rules in addition to prohibitions. Workplace policies cannot prevent an employee from:
- Being employed by another employer
- Performing work in exchange for payment from another employer or business
- Operating their own business
Any workplace policies written or practiced that do not comply with the act will be invalidated. This means that employees under a workplace policy like those listed above will no longer have to follow those restrictions.
What Happens to Employers Who Don’t Follow the Rules?
Employers who retaliate against protected employees may face penalties. The Mayor has made it clear that violation of the act and non-compliance will cost employers a fine for every infraction. In other words, employers in breach of the act will be charged a fine for every time they retaliate against an employee or refuse to follow the new rules.
Fines will be charged as follows:
- $350-$1,000 for each violation
- $1,000 for instances of retaliation against employees.
- $3,000 for subsequent violations
While the act restricts many businesses in D.C., there are exceptions. The following positions, businesses, and employers are exempt from the act:
- Casual babysitters
- Lay members elected to office within a religious organization
- Medical specialists earning more than $250,000 annually
If you are living and/or working in D.C., it may be unclear how this act will affect you. You must contact a lawyer as soon as possible to go over your options and understand your rights.
Schedule a consultation with our highly-skilled attorneys at Emejuru Law for more information.