On December 17, 2020, the Council of the District of Columbia passed the Ban on Non-Compete Agreements Amendment Act of 2020 (the “Act”), meaning that the only hurdles left to clear before this becomes law is approval fron the Mayor, and a 30-day Congressional review period.
What the Act Proposes to Outlaw
In broad strokes, the Act seeks to void, as a matter of law, any new non-compete agreements - regardless of the level of the employee's income (and in that sense, it largely tracks California's non-compete ban, which famously remains one of the most aggressive non-compete bans anywhere in the U.S.).
But here's the kicker:
The Act proposes to go further than California, inasmuch as it seeks to explicitly disallow even non-competes that try to prevent employees from moonlighting for competitors even while on the company's payroll.
Importantly, the Act also provides for civil penalties for violations of the Act, including, in some circumstances, the recovery of attorneys' fees.
What the Act Specifically Excludes
Significantly, the Act goes out of its way to specify that the ban does not apply to non-competes imposed on the seller of a business (who presumably was just paid handsomely for the sale of their business's good will, which is in line with New York's "Mohawk Doctrine"), nor does it prevent an employer from imposing a ban on customer solicitation, or from the taking of its confidential, proprietary information.
What was the DC legislature thinking when it went this far?
The Act's provision proposing to disallow non-compete provisions that ban moonlighting for a competitor even while still collecting a paycheck is sure to raise some eyebrows - as well it should; it is not, generally speaking, unreasonable for an employer to insist that their employees' loyalty remain undivided, which begs the question set forth above:
What were they thinking?
Presumably (the draft law is silent on the issue), their rationale was predicated on the notion of removing any and all impediments to those folks who need to work more than one job in their chosen field in order to make ends meet.
But is that swinging the pendulum too far in favor of employees?
Well, the argument goes, so long as they aren't poaching any clients, or using the employer's confidential information to unfairly benefit a competitor, the answer should be "no," and, after all, why should the employee be limited to working second jobs outside of their chosen field, where they stand to make the most money?
To be sure, I don't know for certain that this was their thinking; but if I were a betting man, that was probably it.
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