Washington, D.C.’s New Stance on Non-Competes
As of October 1, 2022, the District of Columbia restricts the use of non-competition clauses in employment contracts. So what do healthcare practices and professionals need to know?
In December 2020, the Council of the District of Columbia passed one of the nation’s broadest prohibitions on non-competition clauses. The law aimed to encourage employees to find work and have freedom of mobility if the position did not suit their needs. However, the Ban on Non-Compete Agreements Amendment Act of 2020 met staunch opposition from employers and the wider business community.
Many D.C. employers worried that the measure would unfairly harm their business interests. They argued, for example, that non-competes allow them to protect their business’s proprietary and confidential information, preventing employees with sensitive information from absconding to a competitor. Similarly, they contended that without a non-compete to bind them to a single employer, high-level employees could exploit their current positions by “moonlighting” (i.e., working an extra job, usually done without notifying their primary employer).
As a result of these challenges, the effective date of the law was postponed twice and never enforced. However, on July 27, 2022, D.C. Mayor Muriel Bowser signed the Non-Compete Clarification Amendment Act of 2022, which significantly scaled back the 2020 law’s ban on non-compete to create special carve-outs for some employees. The 2022 law went into effect on October 1, 2022.
When Are Non-Competes Not Allowed?
Generally, the law bans non-competes for any individual working in D.C. or under a D.C.-based employer doing most of their work in the District who makes less than $150,000 per year. By contrast, employees earning $150,000 or more may still be subject to non-competes. Notably, the non-competes must:
- be in writing;
- include the scope of the competitive restriction;
- specify the geographical limitations, and must; and
- not exceed an enforcement period of 365 days.
Otherwise, the non-compete is rendered invalid and unenforceable.
The 2022 law highlights specific conditions regarding non-competes between employers and licensed physicians. Indeed, licensed physicians who have completed their medical residency must earn $250,000 or more to be subject to a non-compete agreement. In addition, the enforcement period for licensed physicians is 730 days, as opposed to 365.
New Notice to Employees
Employers must give employees 14 days to review the non-compete and provide notice to the employee “whenever a non-compete provision is proposed.” The notice must state:
The District’s Ban on Non-Compete Agreements Amendment Act of 2020 limits the use of non-compete agreements. It allows employers to request non-compete agreements from highly compensated employees, as that term is defined in the Ban on Non-Compete Agreements Amendment Act of 2020, under certain conditions. [Name of employer] has determined that you are a highly compensated employee. For more information about the Ban on Non-Compete Agreements Amendment Act of 2020, contact the District of Columbia Department of Employment Services (DOES).
Failure to provide the notice may result in an administrative penalty of no less than $350 and no more than $1,000 for each violation. Failure to comply with other provisions of the law may result in fines of over $1,000 for each violation.
Get Legal Support
Do you plan to hire a highly compensated employee for your practice? Are you considering joining a practice as a highly compensated employee? Perhaps you simply need further guidance. An experienced healthcare attorney can help you protect your interests. Schedule a free consultation with our firm to determine the law’s applicability and how it will affect your practice.
This blog is made for educational purposes and is not intended to be specific legal advice to any particular person. It does not create an attorney-client relationship between our firm and the reader. It should not be used as a substitute for competent legal advice from a licensed attorney in your jurisdiction.