A non-compete agreement generally prohibits an employee from, among other things, being employed by a competing business or operating their own competing business. There is a movement across the country to restrict such agreements. Washington, D.C. and Virginia are no different. In 2020, both Washington, D.C. and Virginia passed legislation that would fundamentally change the use and enforceability of non-compete agreements in the future.
Virginia non-compete law applies to employees who make less than $60k.
Virginia’s law is a more modest change. Beginning on July 1, 2020, Virginia began prohibiting non-compete agreements involving “low-wage” workers. A link to the Virginia law can be found here: § 40.1-28.7:8. Covenants not to compete prohibited as to low-wage employees; civil penalty (virginia.gov). Low-wage workers are defined as those making less than the average weekly wage as determined by the Department of Labor Statistics of the U.S. Department of Labor. Those employees whose earnings are predominantly derived from sales commissions, incentives, or bonuses are specifically excluded from the definition. It may surprise some employers that low-wage workers are currently anyone making less than approximately $60,000 a year. This amount changes periodically and employers are responsible for keeping abreast of the average wage.
Nondisclosure and non-solicitation agreements in Virginia can still be enforced.
Virginia employers may still enter into nondisclosure agreements protecting proprietary and trade secret information as well as confidentiality agreements. Agreements not to solicit an employer’s customers or clients may also be enforced but may need to be more narrowly tailored to avoid a restriction on employees providing services to unsolicited clients or customers of the employer. In other words, the scenario in which a customer approaches the employee to provide services likely cannot be the basis for a breach of the non-solicitation agreement.
DC non-compete law applies to all but four occupations.
The Washington, DC law goes further. A link to the legislation can be found here: B23-0494-Signed_Act.pdf (dccouncil.us). The Ban on Non-Compete Agreements Amendment Act of 2020 invalidates non-compete agreements after it is fully implemented, with few exceptions. These exceptions are as follows:
- A high earning doctor1;
- A religious official;
- A babysitter; and
- Volunteers for educational, non-profit, or charitable organizations who are not paid.
Much like in Virginia, the D.C. law will not prohibit an employer’s right to protect confidential, proprietary, or sensitive information or trade secrets through confidentiality agreements. It will also not prohibit an employer from protecting client or customer lists so long as the employee’s access to new opportunities is not hindered in the course of enforcing these agreements.
There are monetary penalties for violations of the DC and Virginia non-compete laws.
There are significant penalties for violations of these laws. In both jurisdictions, the law creates a private cause of action against employers for violations of the new non-compete law as well as gives powers to government authorities to enforce the ban and seek penalties against violating employers. Both DC and Virginia can assess monetary penalties for non-compliance.
In Virginia, violators are subject to a civil penalty of $10,000 for each violation. Yet compliance doesn’t just mean removing non-compete clauses. Every employer must also post a copy of the law wherever it posts other required employee notices.
In DC, penalties assessed by the Mayor and the Office of the Attorney General can fall between $350 and $1,000. Additionally, employers can be assessed substantial damages depending on the nature of the violation; for instance, $1,500 for attempting to enforce an invalid non-compete or up to $2,500 for attempts to retaliate against an employee. A subsequent attempt to enforce an invalid non-compete agreement will result in a minimum of $3,000 in relief to the aggrieved employee.
As Benjamin Franklin once wisely said, “An ounce of prevention is worth a pound of cure.” Jabaly Law can help businesses comply with these laws and address any deficiencies that arise while maintaining the protections businesses need. Reach out to schedule a consultation.
1. This is defined as a medical specialist who holds a license to practice medicine, is a physician, has completed a medical residency, and earns at least $250,000 per year.
