September 12th, 2022
Recent Changes in Non-Competes: What You Need to Know
Author: Darla J. McClure
The District of Columbia Council voted on July 12, 2022, to make modifications to the Ban On Non-compete Agreements Amendment Act which had passed in 2021 but had yet to take effect. The Non-compete Clarification Amendment Act of 2022, passed in response to criticism over the 2021 legislation, contains numerous significant clarifications and additional details that narrow the scope of the original act.
The new law, including revisions listed below, will go into effect on October 1, 2022.
- Language now narrows “covered employees” to those spending a substantial time working in D.C. and not more than 50% of the time working in another jurisdiction. The Amendment also contains exclusions for “highly compensated employees,” casual babysitters and partners in a partnership among others.
- The Amendment redefines “non-compete” provision to mean “a provision in a written agreement or a work-place policy that prohibits an employee from preforming work for another for pay or from operating the employee’s own business.” In doing so, the law excludes lawful provisions – such as non-disclosure agreements – from being placed under the umbrella of a “non-compete” provision.
Even with the recent revisions, the District’s new law continues a recent trend of states – including Maryland and Virginia – passing legislation limiting under what circumstances a non-compete provision may be enforceable. It’s important to speak with an employment law attorney to ensure you know what laws are applicable depending on where you do business.
In 2019 Maryland passed the Non-compete and Conflict of Interest Clauses Act prohibiting employers from entering into non-competition agreements with lower paid employees, defined as those who earn $15 or less per hour or $31,200 annually. If a non-compete clause is found to be in violation of the law, it will be considered null and void even if willingly entered into by the employee.
Virginia passed a law in 2020 prohibiting employers from entering into or enforcing non-compete provisions for any employee whose average weekly earnings are less than the average weekly wage set by the Commonwealth, which is $1,290 in 2022. Additionally, the law clarified that interns, students, apprentices, or trainees who are working in a trade or occupation to gain work or educational experience are not eligible for non-compete clauses. The Virginia law does make an exception for employees who derive most of their earnings from sales, commissions, bonuses, or other incentives.