D.C. Non-Compete Act “Applicability Date” Delayed Until October 1, 2022
In 2021, the District of Columbia passed a “Ban on Non-Compete Agreements” (the “Ban”) purporting to ban most non-compete agreements, except in connection with the sale of a business. We previously reported on some of the concerns and confusion around the Ban. Although the Ban was “effective” from March 16, 2021, it also stated that it would only “apply” upon the “inclusion of its fiscal effect in an approved budget and financial plan.” Now, almost a year later, the D.C. Council has passed an “emergency declaration” delaying the Ban’s applicability until October 1, 2022.
The delay comes, at least in part, as a result of a proposed amendment to the Ban to clarify its terms. D.C. Councilmember Elissa Silverman, one of the members who originally introduced the Ban, cited the need to consider an amendment pending before the D.C. Council, titled the “Non-Compete Conflict of Interest Clarification Amendment Act of 2021,” which seeks to clarify that “bona fide conflict of interest provision” (e.g., restrictions that may prevent an employee from simultaneously working for a company and its competitor) are not prohibited by the Ban. The introductory text accompanying the emergency declaration strongly suggests that the Ban will be amended further, but we have yet to see how, as the D.C. Council has not taken any further action.
Pending further amendments to the text of the Ban, its applicability date is an important one: non-competes entered into before the Ban’s “applicability date” are not voided. Rather, the Ban voids only non-compete provisions in agreements between an employee and employer “entered into on or after the applicability date of this title.”
Bottom line: The emergency declaration regarding the Ban was caused by understandable confusion about how the terms of the Ban would be applied, and when. At this point, it does not appear that any portion of the Ban will be enforced against, or applicable to employers, until October 1, 2022.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.