Danielle Pierre James D. Handley December 14 2022 Update on significant DC ban on non-compete agreements FordHarrison LLP | Employment & Immigration - USA Danielle Pierre, James D. Handley Employment & Immigration IntroductionEmployee categorisationNotice requirementsCommentIntroductionThe DC Ban on Non-Compete Agreements Amendment Act of 2020 was considered one of the most far-reaching prohibitions on noncompete agreements in the country (for further details, see "Non-Compete News: DC Ban on Non-Compete Agreements Set to Take Effect"). However, feedback from the business community prompted the DC Council to revisit the Act, delaying its implementation. Finally, the DC Non-Compete Clarification Amendment Act of 2022 (the amendment) went into effect as of 1 October 2022. This newly amended version, while less far-reaching, is still a significant ban on the use of non-compete agreements and includes important changes that every DC employer should know.Employee categorisationBeginning 1 October 2022, DC employers cannot require or request that "covered employees" sign an agreement or comply with a workplace policy that includes non-compete language or provisions. While the previous version of the law would have created a near total ban on the use of non-compete agreements, under the amendment, this restriction applies to individuals who:earn less than $150,000 in annual total compensation; andgenerally spend at least half of their work time in the District of Columbia or spend a substantial amount of time working in the District of Columbia for a DC-based employer and who do not conduct more than half of their work in another jurisdiction.Excluded from the definition of "covered employees" are "highly compensated employees". Under the amendment, "highly compensated employees" are those who are expected to earn at least $150,000 in a 12 month period (adjusted annually for inflation).The former version of the Act would have also effectively prohibited DC employers from enforcing their anti-moonlighting policies. Likely to be considered a win by the business community, the amendment relaxes this total ban, permitting DC employers to impose restrictions on outside employment activities that could:result in disclosure of the employer's confidential or propriety information;create a conflict with the employer, industry or professional rules regarding conflicts of interest;conflict with a commitment to a higher education institution; orimpair the employer's ability to comply with DC or federal laws or regulations, a contract, or a grant agreement.The amendment does not require employers to modify non-compete agreements executed on or before 30 September 2022.Notice requirementsThe amendment outlines procedural notice requirements for DC employers. When proposing noncompetition agreements to "highly compensated employees," employers must provide a written copy of the agreement, along with the following statutory notice:The District's 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, as that term is defined in the Ban on Non-Compete Agreements Amendment Act of 2020, 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.The above notice must be provided at least 14 days before a new employee's start date, or at least 14 days before an existing employee's deadline to execute the non-compete agreement.Employers that utilise what the law calls "exceptions to the definition of non-compete provisions" (defined as non-disclosure, confidentiality and proprietary information agreements, anti-moonlighting and conflicts of interest agreements, and long-term incentive agreements) are required to provide written copies of the non-compete agreement to an employee:within 30 days after the employee's acceptance of employment;within 30 days after 1 October 2022; andany time any such policy changes.CommentEmployers should train their human resources departments and managers on this new law as soon as possible. DC employers that utilise non-compete agreements will need to adhere to the notice requirements and ensure covered employees are no longer required to sign them. Employers outside of the District of Columbia should bear in mind that the national trend of banning certain non-compete agreements could extend to other jurisdictions in the near future.For further information on this topic please contact Danielle E Pierre or James D Handley at FordHarrison by telephone (407-418-2300) or email ([email protected] or [email protected]).The FordHarrison website can be accessed at www.fordharrison.com.