Non-compete Laws: District of Columbia Scott J. Wenner and Joleen Okun,

Non-compete Laws:
District of Columbia
Scott J. Wenner and Joleen Okun,
Schnader Harrison Segal & Lewis LLP
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A Q&A guide to non-compete law in
District of Columbia.
For the statutes referenced in Question 1, the essential elements
are as follows:
RELEVANT STATE LAW
Restrictions on competition may be enforced if:
1. If non-competes in your jurisdiction are governed by
statute(s) or regulation(s), identify the state statute(s) or
regulation(s) governing:
„„Non-competes
in employment generally.
„„Non-competes
in employment in specific industries
or professions.
GENERAL STATUTE AND REGULATION
GENERAL STATUTE AND REGULATION
„„The
restraint on trade is reasonable.
„„The
restraint is only what is necessary to protect the employer’s
business interest.
„„The
agreement does not go against public policy.
(Deutsch v. Barsky, 795 A.2d 669 (2002), citing Godfrey v.
Roessle, 5 App. D.C. 299 (1895).)
INDUSTRY- OR PROFESSION-SPECIFIC STATUTE AND
REGULATION
There is no industry- or profession-specific statute or regulation.
While there is no statute that explicitly governs non-compete
agreements (or non-competes), the District of Columbia (DC)
Code prohibits any contract that unreasonably restrains trade (DC
ENFORCEMENT
Code § 28-4502).
INDUSTRY- OR PROFESSION-SPECIFIC STATUTE OR REGULATION
3. If courts in your jurisdiction disfavor or generally decline
to enforce non-competes, please identify and briefly describe
the key cases creating relevant precedent in your jurisdiction.
There is no industry- or profession-specific statute or regulation.
There are no cases generally declining to enforce non-competes.
2. For each statute or regulation identified in Question
1, identify the essential elements for non-compete
enforcement and any absolute barriers to enforcement
identified in the statute or regulation.
4. Which party bears the burden of proof in enforcement
of non-competes in your jurisdiction?
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FMLA EmployerLaws:
Non-compete
Coverage
District
andofEmployee
Columbia Eligibility Checklist
REASONABLENESS OF RESTRICTIONS
DC law places the burden of proof on the employer seeking to
enforce the non-compete, as it must show the agreement does
not unlawfully restrain trade (see Deutsch v. Barsky, 795 A.2d
669 (D.C. 2002)).
8. What constitutes sufficient consideration in your
jurisdiction to support a non-compete agreement?
DC courts balance the interests of the employer and employee
when analyzing non-competes. Relevant factors, as discussed by
the court in Deutsch include:
„„The
employer’s (or promisee’s) legitimate business interest.
„„The
nature of the hardship imposed on the employee.
An offer of employment is sufficient consideration for a noncompete in DC. However, if the non-compete agreement
is executed after employment begins, then some further
consideration, such as a change in terms of employment, is
likely necessary. The assurance of continued employment for
a substantial period of time has been recognized as adequate
consideration (Ellis v. James V. Hurson Associates Inc., 565
A.2d 615 (D.C. 1989)). In the Ellis case, substantial meant
“approximately ten years.”
5. Are non-competes enforceable in your jurisdiction if
the employer, rather than the employee, terminates the
employment relationship?
Although not rendering non-competes unenforceable
automatically, a DC court may choose not to enforce a noncompete if the employee was terminated without good cause
as a discretionary matter. For a case in which a court enforced
a non-compete despite its applying equally to employees who
were terminated, see Ellis v. James V. Hurson Associates Inc.,
565 A.2d 615 (D.C. 1989). As with all cases in this jurisdiction, a
fact-dependent inquiry determines whether the non-compete is
reasonable and enforceable.
9. What constitutes a reasonable duration of a noncompete restriction in your jurisdiction?
Although this inquiry is fact-specific, up to three years is often
considered a reasonable duration for a non-compete restriction in
DC (see Ellis v. James V. Hurson & Assocs., Inc., 565 A.2d 615
(D.C. 1989)). However, a DC court also found that three years
was too restrictive where the business required manual unskilled
labor and no significant trade secrets were involved (Chemical
Fireproofing Corp. v. Krouse, 155 F.2d 422 (D.C. App. 1946)).
6. Do courts in your jurisdiction interpreting non-competes
have the authority to modify (or blue pencil) the terms of
the restrictions and enforce them as modified?
In other cases, longer restrictive periods have been permitted.
Some examples include:
„„Erikson
v. Hawley, 12 F.2d 491 (D.C. App. 1926). In Erikson, a
ten-year restriction in a contract between an orthodontist and
his apprentice was considered a reasonable duration because
it was a common time period in the industry and the apprentice
received as consideration the benefit of his employer’s expertise.
Only one DC case authoritatively discusses the blue pencil rule
(Ellis v. James V. Hurson Associates Inc., 565 A.2d 615 (D.C.
1989)). In that case, the DC Court of Appeals held that the trial
court properly entered a preliminary injunction enforced only a
portion of a restrictive non-compete covenant. The court did not
specifically adopt a universal blue pencil rule, however, because
it found that the enforceable and unenforceable terms of the
covenant were severable according to the contract terms. Given
the limited opportunity the courts have had to consider the rule,
it is unclear whether DC courts will apply the blue pencil rule to
non-compete agreements in the future.
„„Meyer
v. Wineburgh, 110 F. Supp. 957 (D.D.C. 1953).
In Meyer, the court found that a five-year restriction was
enforceable where the restriction was otherwise reasonable, did
not create an unfair hardship and did not violate public policy.
Courts may consider several factors, as discussed in Chemical
Fireproofing, when determining reasonableness of a non-compete
restriction including the:
„„Type
7. Will choice of law provisions contained in noncompetes be honored by courts interpreting noncompetes in your jurisdiction?
The case law is not settled on whether and when the DC courts
will enforce choice-of-law provisions contained in non-competes.
The DC courts have honored these provisions in non-compete
agreements where they bear a substantial relationship to the parties
(L.G. Balfour Co. v. McGinnis, 759 F.Supp. 840 (D.D.C. 1991) and
NRM Corp. v. Hercules, Inc. 758 F.2d 676 (D.C. Cir. 1984)).
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of business.
„„Services
provided by the employee.
„„Position
of the employee.
10. What constitutes a reasonable geographic noncompete restriction in your jurisdiction?
To determine whether a geographic restriction is reasonable, DC
courts look to the rule of reason, a fact intensive inquiry looking
2
at the “totality of the circumstances” (see Deutsch v. Barsky, 795
A.2d 669 (D.C. 2002)).
13. If there is any other important legal precedent in the
area of non-compete enforcement in your jurisdiction not
otherwise addressed in this survey, please identify and
briefly describe the relevant cases.
Some examples of application of the rule of reason include:
„„Meyer v. Wineburgh, 110 F.Supp 957 (D.D.C. 1953), in which a 30-
mile restriction was considered reasonable where the restriction:
„„was
otherwise reasonable;
„„did
not create an unfair hardship; and
„„did
not violate public policy.
There is no other important legal precedent in this area.
REMEDIES
Chemical Fireproofing Corp. v. Krouse, 155 F.2d 422 (D.C. App.
1946), in which a covenant restricting solicitation of customers
across a six-state region was considered to be too restrictive when
coupled with a three-year time restriction. The court, however,
suggested that the region was not overbroad and was enforced as
part of a one year restriction on competition in the same industry.
Both injunctive relief and damages may be available to employers
For the factors a court may consider in this analysis, see Question 9.
enforcing non-competes in DC (see Meeker v. Stuart, 188 F.Supp.
14. What remedies are available to employers enforcing
non-competes?
272 (D.D.C. 1960)).
11. Does your jurisdiction regard as reasonable noncompetes that do not include geographic restrictions,
but instead include other types of restrictions (such as
customer lists)?
15. What must an employer show when seeking a
preliminary injunction for purposes of enforcing a noncompete?
To obtain a preliminary injunction under DC law, an employer
Non-competes in DC may include reasonable non-geographic
restrictions if they protect legitimate business interests of the
employer, such as trade secrets (which may include customer
lists) or goodwill. Examples include:
must show that:
„„It
is likely to prevail on the merits of one of its claims.
„„It
would be irreparably harmed if the injunction is not granted.
„„The
„„United
States Travel Agency, Inc. v. World-Wide Travel Service
Corp., 235 A.2d 788 (D.C. 1967). In this case, an idea that an
employee learned about while working for his former employer
was not sufficiently original to rise to the level of a protected
business asset.
employer’s hardship without the injunction is greater than
the employee’s hardship suffered from the injunction.
„„The
injunction is in the public interest.
(Jacksonville Port Authority v. Adams, 556 F.2d 52 (D.C. Cir. 1977).)
„„Ruesch
v. Ruesch International Monetary Services, Inc., 479
A.2d 295 (D.C. 1984). In Ruesch, the court distinguishes
between types of customer lists, holding that lists of non-route
customers (where there is no particular relationship between
employee and customer) are not protectable as trade secrets.
However, the court notes that other customer lists may be
protectable on a case-by-case basis.
OTHER ISSUES
16. Apart from non-competes, what other agreements are
used in your jurisdiction to protect confidential or trade
secret information?
These restrictions might also include preventing employees from
soliciting a former employer’s customers (see Ellis v. James V.
Hurson & Assocs., Inc., 565 A.2d 615 (D.C. 1989)).
Nondisclosure agreements are used and are enforced under
the Uniform Trade Secrets Act (DC Code § 36-401 to 410). In
addition, employers may use agreements not to solicit other
employees and covenants prohibiting solicitation of customers to
12. Does your jurisdiction regard as reasonable
geographic restrictions (or substitutions for geographic
restrictions) that are not fixed, but instead are
contingent on other factors?
protect confidential or trade secret information.
17. Is the doctrine of inevitable disclosure recognized in
your jurisdiction?
There are no examples of reasonable non-fixed geographic
restrictions in DC.
The doctrine of inevitable disclosure is not recognized in DC.
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