Updated: DC Non-Compete Ban Delayed Until April 1, 2022
As Arent Fox previously outlined, the Act would make the District of Columbia one of the few jurisdictions in the United States with a near-total prohibition on the use of employment non-competes. The Act’s applicability date – the date on which employers are subject to its terms – has been deferred to April 1, 2022. The Act will only apply to agreements entered into on or after the applicability date.
Despite passage in December, the Act remained ineffective pending both the mandatory 30-day legislative congressional review period and the DC Council's appropriation of funds in the city's annual budget to pay for the Act's implementation. On August 10, 2021, the DC Council approved its FY 2022 budget, which included funding for the Act. Critically for employers, the DC Council modified the Act's applicability date to April 1, 2022.
DC Council members may still seek to amend the Act prior to April 1. Councilmember Silverman has proposed an amendment regarding the conflict of interest and confidentiality agreement provisions of the Act. The amendment clarifies that employers can prohibit employees from working for competitors during the course of their employment if doing so would create a "bona fide conflict of interest." The amendment defines a "bona fide conflict of interest provision" as:
an otherwise lawful written provision or workplace policy that bars an employee from accepting money or a thing of value from a person during the employee’s employment with the employer because the employer reasonably believes the employee’s acceptance of money or a thing of value from the person will cause the employer to (A) [c]onduct its business in an unethical manner; or (B) violate applicable local, state, or federal laws or rules.
The amendment also states that employers may prohibit an employee's use of confidential, proprietary, or sensitive information, client lists, customer lists, or trade secrets during or after their employment. As currently drafted, the Act only prohibits the disclosure of such information.
Covered employers should continue reviewing and revising their existing employment agreements and policies, as the law will only apply to agreements entered into on or after the applicability date. At the same time, further amendments – and further extensions of the Act's applicability date – remain possible. Arent Fox will continue to monitor the DC Council's actions and provide updates on any developments relating to the Act.