United States: D.C.'s Revised Ban On Non-Compete Clauses Now Focuses On Income Level

Good news for D.C. employers who were worried about the (very) broad D.C. proposed ban on non-competes!  On July 12, 2022, the District of Columbia Council passed the Non-Compete Clarification Amendment Act of 2022 (B24-0256) (“Amended Act”) to amend the 2020 blanket ban on non-compete clauses with a ban for only those whose total compensation per year is less than $150,000, or $250,000 for medical specialists. Compensation includes bonuses, commissions, overtime premiums, and vested stock.

The Amended Act, which will take effect on October 1, 2022, significantly scales back the Ban on Non-Compete Agreements Amendment Act which would have sought to impose the broadest non-compete prohibition in the country.

This Amended Act will apply to employees who (i) spend more than 50% of their time working in D.C., or (ii) if they spend “a substantial amount of” their “work time for the employer” in D.C. and do not spend more than 50% of their work time in another jurisdiction.

The Amended Act also restricts the duration of non-compete agreements for employees making over $150,000 to one (1) year and two (2) years for medical specialists making in excess of $250,000. Employees are required to provide a copy of the non-compete agreement at least fourteen (14) days before an individual “commences employment for the employer” or if the individual is already employed by the employer, “at least fourteen (14) days before the “employee must execute the agreement.” 

Among other things, the Amended Act requires employers to include specific disclosures in their non-competes for individuals making over the $150,000 annual threshold. An employer who fails to comply with the Amended Act could face a penalty of anywhere between $350 to $1,000 for each violation.

D.C. employers should be aware that the compensation thresholds set out in the Amended Act are subject to annual adjustments to reflect increases in the consumer price index.

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