After the local business community pushed back on the D.C. Council’s near-total ban on mandatory non-compete agreements, a revised and scaled-back version of the ban is now in effect. The revised law, which took effect October 1, 2022, allows for the continued use of such clauses for highly compensated employees.

The Non-Compete Clarification Amendment Act of 2022 restricts mandatory non-compete agreements to employees who make more than $150,000 in annual compensation (or $250,000 for employees who are medical specialists). Starting in 2024, these amounts will increase in proportion to the Consumer Price Index for Urban Consumers in the Washington, D.C. metropolitan statistical area. Limiting non-competes to highly compensated employees brings D.C. in line with how these agreements are treated in many states.

The amended law further provides that restrictions on the use of non-competes apply only to employees in one of these categories:

• Those who spend more than 50 percent of their work time for the employer working in D.C.
• Those who spend a substantial amount of their work time for the employer in D.C. and who do not work for that employer in another jurisdiction for 50 percent of more of the time.

The new law also specifies the circumstances in which an employer has the right to prohibit an employee from moonlighting (i.e. performing work for another employer while still employed). Such work can be disallowed if the employer reasonably believes that it could do one of the following:

• Lead the employee to disclose the employer’s confidential or proprietary information
• Violate conflict of interest rules set forth by the employer, industry or profession
• Impair the employer’s ability to comply with D.C. or federal law

Employees who believe their employer is not complying with the new law can submit a complaint to the D.C. mayor’s office and/or file a lawsuit in civil court. The mayor’s office can issue fines ranging from $350 to $1,000 per violation. Additionally, the employer could have to directly pay the affected employee between $500 and $1,000 for a first offense and $3,000 or more for a subsequent offense.

Despite the recent amendments, D.C.’s restriction of non-competes is still one of the broadest in the country. Most non-compete agreements are still banned in the district. Employers and employees should not hesitate to speak with an experienced D.C. employment lawyer to understand their legal rights under the amended law. There will undoubtedly be some confusion among both sides as everyone learns the new rules.

The attorneys of Cashdan & Kane, PLLC have more than 45 years of combined experience representing employees and employers in Washington, D.C. Please call 908-264-9331 or contact us online if you have a question about the validity of non-compete agreements in the district.