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Imagine leaving a job only to be told you can’t work in your own industry because of a non‑compete. Today’s professionals want to protect their ability to support themselves and their families. This leads them to question when non-competes are unenforceable. Courts recognize the need to balance a company's interests with those of its employees. By adhering to these rules carefully, both parties can avoid disputes and safeguard their professional and business interests.
A non-compete is a contractual agreement between a company and its employees or independent contractors. The agreement limited the employee’s or contractor’s ability to work/for a competing business. They also cannot start a competing business upon termination of their employment. Generally, the Washington, DC courts treat non-compete agreements as a detriment to trade. They are only enforceable when strict requirements are met. This has been reinforced with consistent court rulings over non-compete cases.
Employers typically use non-compete agreements to protect their business interests. It’s a way to keep trade secrets and other sensitive information from falling into competitors' hands. They can also be used to protect customer relationships that the company has invested in to gain and maintain. A non-compete agreement is not the same as a non-solicitation agreement. These are agreements that restrict former employees from soliciting the employer’s clients or customers. It also restricts former employees from soliciting the employer’s current employees. These agreements are often treated differently from non-competes, depending on scope and effect.
Non-compete agreements are different from confidentiality or non-disclosure agreements. These are meant to protect information. They are generally more broadly enforceable. Where non-compete agreements have income thresholds, non-disclosure agreements do not. Employers sometimes label broad restrictions as “non-solicitation” or “confidentiality” clauses when they function as de facto non-competes. Courts look at the practical effect of the agreement and not the name the employer gave it. If a restrictive agreement prevents competitive employment, it will be treated as a non-compete.
Non-compete agreements are governed by the District of Columbia Non-Compete Clarification Amendment Act of 2022. Unlike many jurisdictions, Washington, DC begins with a broad ban on non-compete agreements for most employees. The ban coverage is broad, applying to employees who perform work in or are reasonably expected to work in DC. Coverage applies regardless of job title or industry.
Employers are generally not permitted to prevent employees from:
DC permits non-competes only for employees who meet strict compensation thresholds, adjusted annually. Even then, the restriction must be reasonable in duration and scope. The employer must also comply with strict notice requirements. Employees with salaries over $150,000 may be subject to a one-year non-compete. The employee must be notified in advance. Medical specialists earning over $250,000 may be subject to a two-year non-compete. A non-compete can also be a part of a business sale or ownership interest change. However, these non-competes are evaluated differently from a purely employment non-compete.
Employers must provide written notice before issuing non-compete agreements to employees. It needs to be accompanied by a clear explanation of the employee’s rights under DC law. The notice must be sent at least 14 days before signing the non-compete agreement. It may also be sent at the time of the employee's hire. A non-compete that otherwise qualifies for an exception can still be unenforceable if notice requirements are not met.
Even statutorily permitted non-compete agreements must comply with the scope and duration. They must be narrowly tailored in scope and limited in duration. It also needs to be directly connected to a legitimate business interest. Courts will also consider specific clauses in the non-compete agreement. It views terms that effectively prevent outside work unfavorably. Unreasonable scheduling or approval requirements are also viewed unfavorably. Clauses that prevent secondary employment are also viewed negatively.
By working with legal counsel, employers and employees can find a balance. Employers want to protect their competitive edge in the market. Employees want to protect their ability to find gainful employment. These tips will help both parties create an enforceable non-compete agreement.
It can be tempting for employers to draft a non-compete that’s as protective as possible. However, this increases the likelihood that it will be unenforceable. A better approach is to draft non-competes with enforceability in mind. Avoid using default broad language. Don’t allow restrictions to overreach in scope, duration, or geography. Focus non-compete agreements on limitations that are genuinely necessary to protect trade secrets or confidential information. Provide new employees with the non-compete agreement before they accept the offer of employment. If it’s provided after the fact, include additional compensation. It can’t be continued employment for the employee. Provide non-compete agreements only to qualified candidates. Create an internal procedure to ensure only qualifying employees are required to sign.
Work with an employment law firm to regularly review agreements. The law changes regularly, and it’s up to the company to ensure it remains in compliance. Having legal counsel makes it easier to update agreements that may no longer comply with current statutory requirements.
When handed a non-compete agreement, employees should not assume it is valid. Many non-competes are unenforceable due to timing, compensation, or overly broad restrictions. In addition, singing a non-compete does not automatically mean it will hold up in court. Employees should pay close attention to how their employment ends. Layoffs, reductions in force, and involuntary terminations may affect the enforceability of a non-compete. The employer’s failure to pay the required compensation during the restriction period can also invalidate the agreement.
Keeping a copy of all documents is essential for employees. Save offer letters, compensation records, bonus structure communications, and termination notices. These documents become crucial when determining whether a non-compete agreement is enforceable. Don’t be afraid to consult with a lawyer before accepting a new position with a required non-compete agreement. A lawyer can advise on the enforceability. They can also assist with negotiating different terms.
DC law leaves little room for error when it comes to non-compete agreements. Agreements that fail to meet compensation thresholds, notice requirements, or scope limitations are often unenforceable, regardless of intent.
For both employers and employees, small missteps can have serious legal consequences. Crowley So LLP regularly advises businesses and professionals navigating DC’s non-compete laws, helping them assess enforceability, reduce risk, and resolve disputes efficiently. If you have questions about a non-compete agreement or your rights under DC law, contact us today to discuss how we can help you.
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