The Office of the AG Highlights Enforcement of D.C.'s Non-Compete Ban

The D.C. Non-Compete Ban is part of a growing trend of states and localities restricting or prohibiting non-compete agreements, especially for low-wage or vulnerable workers. Non-compete agreements can significantly impact workers’ mobility, career opportunities, bargaining power, and employers’ ability to protect their legitimate business interests and compete in the market.

The examples provided by the Office of the Attorney General for the District of Columbia (OAG) demonstrate that the D.C. Non-Compete Ban is not exclusive to employers who operate only in D.C. but for out-of-state employers who have employees based in the District. Employers with employees or locations in the D.C. area may want to consult their legal counsel to determine if D.C.’s Non-Compete Ban applies to them.

Revisions made to  the District of Columbia's Non-Compete Ban 

The OAG has announced several recent violations of the District of Columbia's 2022 law banning non-compete agreements. This is the second amendment to this law. Prior amendments to the ban were made in 2020. The latest amendment was signed on July 27, 2022, prohibiting non-compete agreements for most D.C. employees. Here are some of the key takeaways from the 2022 amendment:

• This applies to all employers operating in D.C., regardless of where they are headquartered or incorporated.
• It covers most employees earning less than $150,000 annually.
• It bans employers from retaliating against employees who refuse to sign non-compete agreements, ask about their rights under the law, or file a complaint alleging a violation of the law.

The OAG enforces the D.C. Non-Compete Ban and can investigate and sue employers who violate the law. The latest amendment in 2022 went into effect on October 1, 2022, but the OAG announced three recent examples to further clarify what constitutes a violation of the law. 

OAG cites recent violations

On November 17, 2023, Attorney General Brian L. Schwalb announced that the OAG had settled three investigations with D.C. employers. Two were non-compete agreement violations and the third involved no-poach clauses. The OAG obtained the following relief for affected workers and the District and released the following information:

• A Florida-based healthcare recruiting and staffing agency was ordered to pay over $110,000 in damages, compensation, and restitution for subjecting ten D.C. workers to non-compete agreements allegedly violating the law, including one D.C. worker who was unemployed for 90 days due to the illegal non-compete agreement. The agency was also ordered to pay $10,000 in penalties to the District and ordered to stop using non-compete agreements for District employees and any employees seeking employment in the District.
• A D.C.-based ping pong social club was ordered to pay $15,000 in penalties to the District and $1,000 to each of the organization's three workers required to sign non-compete agreements. The agreements restricted their ability to work for competitors or in similar positions. The agency was ordered to stop using non-compete agreements for District employees and any employees seeking employment in the District. The organization will notify its District employees that any non-compete agreements signed are now void.
• A restaurant franchise company with no offices or employees in D.C. violated the D.C. Non-Compete Ban by including a “no-poach” clause in its franchisee contracts, which prohibited employees from working for another franchise in the same chain. Despite no direct physical presence in the District, the OAG determined that the presence of more than 30 franchisee locations meant that the company operated within the District. The company committed to removing the no-poach provisions from its future franchisee contracts, to stop enforcing any existing no-poach provisions for franchisees located within D.C., and to inform its D.C. franchisees that it will not enforce the no-poach clauses.

To read more about these cases released by the Office of the Attorney General for the District of Columbia, take a closer look here.

Implications for employers in and out of the D.C. area

The D.C. Non-Compete Ban is part of a growing trend of states and localities restricting or prohibiting non-compete agreements, especially for low-wage or vulnerable workers. Non-compete agreements can significantly impact workers' mobility, career opportunities, bargaining power, and employers' ability to protect their legitimate business interests and compete in the market.

The examples provided by the OAG demonstrate that the D.C. Non-Compete Ban is not exclusive to employers who operate only in D.C. but for out-of-state employers who have employees based in the District. Employers with employees or locations in the D.C. area may want to consult their legal counsel to determine if this law applies to them.