Non-compete agreements in the District of Columbia are illegal for many workers under certain income thresholds. Non-compete agreements restrict employees from working and are often the most problematic when they prohibit employees from working in the same industry or geographic area after they leave their position. Non-compete agreements can force individuals to stay in lower-paying jobs and prevent career mobility for workers at all levels, including those who want to start their own businesses. To address these problems, D.C.’s Ban on Non-compete Agreements prohibits employers from entering non-compete agreements with employees who earn less than approximately $150,000 a year. D.C. Code § 32–581.02. This ban on non-compete agreements is an important step in protecting D.C. workers’ rights.
Who is covered by D.C.’s ban on non-competes?
Most District employees who earn less than $158,363 annually are protected by the non-compete ban. To qualify for protection, employees must spend at least half their time physically working in the District for any employer, or work for a District employer and not spend more than half of their time physically working for that employer outside of the District. All broadcast employees are covered, as are medical specialists earning less than $263,939 annually.
So, an employee at a fast-food restaurant in D.C. who earns $40,000 annually would also be protected by the ban on non-compete agreements. As is an employee who works for a non-profit based in Virginia, but who spends the majority of his time physically working in the District and earns $80,000 annually.
While a consultant who works exclusively in the District and earns $200,000 a year is not covered under the non-compete ban, she would still be entitled to procedural protections that the law requires for “highly compensated individuals,” as discussed below. She might also be protected by D.C. antitrust laws.
Employees working for the D.C. or federal government are not covered by the D.C. Ban on Non-Compete Agreements.
D.C.’s non-compete ban protections
Employers may not require or request that a current or prospective employee protected by the non-compete ban sign an agreement or comply with a workplace policy that includes a non-compete provision. Any agreement signed on or after October 1, 2022, that includes a non-compete provision is void and unenforceable, and the employee cannot be held to the non-compete requirements. Employers are also prohibited from retaliating against employees for their refusal to sign or comply with a non-compete provision. An employer’s prohibition on working for a direct competitor while employed with the employer may be legal in some circumstances, as this could create a conflict of interest for the employer. But a ban on working for a competitor after an employee ceases working for the employer would be unlawful if the employee is protected by the non-compete ban.
Employers that violate this law can be fined and be liable for payments to the affected employee. The D.C. Office of the Attorney General enforces the non-compete ban and has already required multiple employers, including a healthcare staffing agency and a health and fitness consultant company, to pay fines to the District and payments to employees for violating the non-compete ban.
Non-compete provisions signed before October 1, 2022, are not automatically void under this law but are subject to D.C. contract law. These older non-compete agreements must further a legitimate business interest and be reasonable in duration and geographic scope.
What rights do I have as a “highly compensated employee”?
Under D.C.’s non-compete ban, highly compensated employees can still be subject to non-compete provisions. Highly compensated employees are employees who earn $158,363 or more and medical specialists who earn $263,939 or more annually. Each year the salary caps for determining who is a highly compensated individual increase based on inflation in the Washington Metropolitan Area, so the numbers vary slightly year to year.
Employers must follow certain procedural requirements when entering a non-compete agreement with a highly compensated employee. For instance, such non-compete agreements must specifically define the post-employment restriction, including what services, roles, industry, or competing entities the employee is restricted from performing work in or on behalf of. The non-compete must also specifically define the geographic limitations of the work restriction, and the duration of the non-compete provision. For employees who are not medical specialists, the non-compete provision cannot last more than 365 calendar days from the date the employee stops working for the employer. And for medical specialists, the non-compete provision cannot last more than 730 calendar days from the date the employee stops working for the employer.
Employers must also provide highly compensated employees with the non-compete provision at least 14 days before the individual begins their employment for the employer or at least 14 days before the employee must execute the agreement if the individual is a current employee. Employers are prohibited from retaliating against highly compensated employees who ask for a copy of the agreement or any of the information they are entitled to, like the specific restrictions of the non-compete agreement.
This article solely provides general information and is not intended as legal advice. If you need legal advice or representation regarding a non-compete agreement you have signed or are being requested to sign, Atkinson Law Group may be able to help; you can contact us here for a consultation.