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New DC Noncompete Law to (Finally) Take Effect Oct. 1

The Ban on Non-Compete Agreements Amendment Act of 2020 passed by the DC Council over the summer will take effect on Oct. 1. The new law imposes two new income thresholds for “noncompete provisions” with “highly compensated employees”—those who earn at least $150,000—and “medical specialists”—licensed physicians earning at least $250,000. The new law defines an employer as an individual, partnership, general contractor, subcontractor, association, corporation, or business trust operating in the District, or any person or group of persons acting directly or indirectly in the interest of an employer operating in the District in relation to an employee.

The law provides for new administrative authority and enforcement mechanisms. The per-violation penalty is no less than $350 and no more than $1,000, but there is minimum net-penalty of $1,000. The law is applicable to noncompete agreements executed on or after Oct. 1. DC employers that are interested in using noncompete agreements should consider identifying which employees are within the scope of the law based upon where they work. Employers also should consider modifying policies to comply with the new law, entering into agreements containing noncompetes before the law takes effect, and assessing whether alternative forms of restrictions not covered by the law would offer adequate protection.