DC Council Approves Bill to Amend Ban on Non-compete Clauses
The bill amends a blanket ban on non-competes that was passed in 2020 but wasn’t implemented, in part, following feedback from employer groups.
The legislation bans non-competes for employees whose total compensation is less than $150,000 a year.
Here’s what the bill does:
• Bans non-competes for employees whose total compensation per year is less than $150,000, or $250,00 for medical specialists. The bill clarifies that compensation includes bonuses, commissions, overtime premiums, and vested stock.
• The original ban applied to agreements with any employee who performs work or prospective employee whom the employer reasonably anticipates will perform work in the District. The amended bill covers employees who either spend a majority of their work time working in DC for the employer, or their employer is based in DC and they “regularly” spend a “substantial amount” of work time for the employer.
• Clarifies that employers may still ban employees not only from disclosing confidential information or trade secrets to a subsequent employer but also from using such information themselves.
• Employers must provide the non-compete to the highly compensated employee in writing at least 14 days before the start of employment or the execution of the agreement.
Existing non-compete agreements are excluded. The bill is on Mayor Muriel Bowser’s desk for review and is expected to take effect October 1.
Only a few states regulate non-compete clauses. Maryland only prohibits the use of non-competes for employees who earn an amount equal to or less than $31,200 annually or $15 per hour, while Virginia has no ban.
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