D.C. employers should be aware that the District’s new law banning virtually all employee noncompete agreements and policies does not currently apply and likely will not become applicable this year.
The Ban on Non-Compete Agreements Amendment Act of 2020 (Act), which Mayor Bowser signed into law in January 2021, may be the most restrictive noncompete statute in the country. As we previously reported, on its face the Act appears to ban nearly all agreements that prohibit employees from working for competitors post-employment, as well as agreements and policies that prohibit employees from competing with their employers during employment, without regard for employees’ common law duty of loyalty or traditional conflict of interest principles.
The Act took effect on March 16, 2021, following a mandatory 30-day Congressional review period and publication in the D.C. Register. However, by its terms the Act does not become applicable until it is funded in an approved D.C. budget and financial plan, which has not occurred and likely will not occur this year. In a July 14, 2021 committee hearing, Councilmember Silverman, one of the Act’s original sponsors, announced that she has requested that the D.C. Council postpone funding of the Act until April 2022 in order to give the D.C. Council time to consider issues that have been raised about the Act since its enactment, including by members of the District’s business and higher education communities.
The upshot is that for now, D.C. employers can continue to enter into reasonable noncompete agreements and enforce conflict of interest policies and other policies that limit outside employment and business activities by current employees. Employers should stay tuned for further developments, both from the D.C. Council and from the Federal Trade Commission, which President Biden recently instructed in an Executive Order to consider whether to impose unspecified limits on employee noncompete clauses and agreements nationwide.