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A Sign Of Things To Come? D.C. Bans Employee Non-Competes That Apply To Current Employees And To Post-Employment Activity

On March 5, 2021 by Schnader in Labor and Employment

UPDATE (4-5-21): The D.C. law is “effective” as of March 21, 2021 but will not be “applicable” until the Fall of 2021.  Here are the details: There has been confusion over when compliance with the new D.C. law will be required. The uncertainty is caused by the presence of both the terms “effective date” and “applicability date” in the new law without explaining their meanings. The “effective date” is the date the bill became law under the terms of the District’s home rule law – a process explained in this article. The new Act became “effective” on March 21, 2021. The “applicability date” is different, however. The Act states in Section 302 that it will not become applicable until “the date of inclusion of its fiscal effect in an approved budget and financial plan” for the District – a requirement imposed by another D.C. law. Because the financial impact of the new law was not included in the budget and financial plan approved last year, it is not yet applicable but will satisfy that requirement in the Fall of 2021. It is the applicability date that will trigger compliance obligations for D.C. employers.

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Scott J. Wenner published a client alert, “A Sign Of Things To Come? D.C. Bans Employee Non-Competes That Apply To Current Employees And To Post-Employment Activity.”

The District of Columbia Council unanimously passed, and on January 11 Mayor Bowser signed, The Ban on Non-Compete Agreements Amendment Act of 2020 — the most aggressive prohibition against non-competition agreements in the country. When effective, the new law, which will apply to all employers with employees in the nation’s capital, will completely bar, with few exceptions, both post-employment covenants not to compete and non-competes that apply to current employees.

The new D.C. law is probably indicative of a wave of even broader restrictions in the near future. Whether in the form of forthcoming administrative or legislative action, it seems likely that non-competition agreements may be subjected to federal regulation and perhaps largely banned or severely restricted nationwide.

While employers will have to adjust to this new reality should it come to pass, a combination of well drafted non-disclosure and non-solicitation policies should offer necessary protection for legitimate business interests.

Click here to read the full client alert.