Frequently Asked Questions About Washington, D.C. Noncompete Agreements
Washington, D.C. is filled with working professionals who are subject to noncompete agreements. A noncompete agreement is a type of employment contract where a departing employee promises not to work in the employer’s industry for a period of time and in a certain geographical area. In other words, the employee agrees to find a new job where they don’t have to compete against the former employer.
Most states do not look favorably upon noncompete agreements and a few will refuse to enforce them. However, Washington, D.C. (Washington) will enforce noncompete agreements as long as they aren’t unfair to employees. But how can you tell if a noncompete agreement is unfair? There is no easy answer to that question, although the below discussion can help.
How Is a Noncompete Agreement an Enforceable Contract?
Compared to other jurisdictions, Washington’s legal framework on noncompete agreements is somewhat sparse. Additionally, the closest statute Washington has that deals with noncompete agreements is § 28-4502 of the Code of the District of Columbia.
Even though this law prohibits any contract that restrains trade or commerce (which one might think a noncompete agreement does), Washington courts are willing to enforce noncompete agreements in many situations.
As a general rule, a noncompete agreement will be enforceable if the restrictions placed on the departing employee are:
- No more than what is necessary to protect the employer’s business interest, and
- Do not violate public policy (public policy refers to principles and ideals that promote the public interest).
These sound straightforward and in theory, they are. But when it comes down to the nitty-gritty facts of the case, courts often have trouble applying these three elements to an actual noncompete agreement.
For example, what constitutes “reasonable?” A noncompete agreement that bars a former hairdresser from setting up shop across the street seems reasonable. But what if it’s 10 miles away? How about 30 miles?
Let’s assume that barring the hairdresser from starting her own business within 30 miles of her former employer is considered reasonable. Does this 30 mile radius rule still apply if the noncompete agreement is being enforced against a hot dog cart vender, whose primary clientele walk to lunch? Probably not, because a geographic limitation of just a few blocks may be reasonable and still protect the employer. But then the question becomes, how many blocks is “just a few?”
Another way Washington courts examine reasonableness is to determine how badly refusing to enforce the noncompete agreement will harm the employer. Courts will also determine reasonableness by looking at what sort of hardship the employee faces should the noncompete agreement be enforced.
Doesn’t the Employee Get Something in Return for Signing a Noncompete Agreement?
Yes. To have a valid contract, each side must be giving something of value; the legal term for this is “consideration.” So in a contract of sale for a house, for instance, the seller is giving the house while the buyer is giving the money.
In Washington, a job offer is sufficient consideration from the employer in return for the employee signing the noncompete agreement. If the employer asks an existing employee to sign a noncompete agreement, a promise of continued employment for a significant time period may also constitute sufficient consideration. But if the employee has just been fired and is only then asked to sign a noncompete agreement, the employer will have to think of something else to serve as consideration, such as a cash payment.
Is a Noncompete Agreement Still Enforceable if the Employer Fires the Employee?
It depends on the reason the employee was fired. The noncompete agreement will most likely be enforced as long the employee was fired for good reason. Remember, courts like to focus on fairness.
If the court feels an employer wrongfully terminated the employee, there’s a decent chance the court will decide not to enforce the noncompete agreement. In contrast, if the employee was fired for cause, such as embezzling company funds, a court will probably have no problem enforcing the noncompete agreement.
Are There Any Limitations on a Noncompete Agreement?
Yes. The biggest two limitations concern how long the noncompete agreement is in effect and where it applies geographically.
It’s difficult to provide concrete rules to explain how long a noncompete agreement may be in effect and what geographical areas it can cover, yet still be valid. For instance, the more skills or specialized information an employee has, the longer period of time and wider the geographical scope a noncompete agreement can have and still be enforceable.
Additionally, the bigger the geographical restriction on where an employee can work, the shorter period of time the noncompete agreement can be in effect and vice versa. So a court might be ok with a noncompete agreement that applies for:
- Two years and within a 30 mile radius of the employer,
- One year and within a 50 mile radius of the employer, or
- Three years and within a 10 miles radius of the employer.
However, the court may not enforce the same noncompete agreement if it applies for three years and within a 50 mile radius of the employer.
What Could Happen if an Employer Sues a Former Employee for Violating a Noncompete Agreement?
From the employee’s perspective, one piece of good news is that the employer has the burden of proving the noncompete agreement is enforceable. Put another way, the employer must prove the elements for an enforceable noncompete agreement exist. These elements include things such as consideration, reasonableness, protecting the employer’s business interests and not violating public policy.
Washington courts can partially enforce a noncompete agreement if part of it is invalid. This is called “blue penciling” and refers to a court ignoring the invalid portions of the contract, but honoring the valid portions.
If the court concludes a valid noncompete agreement has been violated, it can usually provide the employer with two types of relief: injunctive relief and monetary damages.
Injunctive relief is a type of legal remedy that commands someone to do (or not do) something. In the context of noncompete agreements, an employer who receives injunctive relief may have the court order the employee to stop working for the new employer.
Monetary relief refers to cash payments for things such as financial losses due to stolen clients or liquidated damages set forth in the noncompete agreement.
For More Information
To find out more about noncompete agreements, feel free to contact us. You can speak with a Washington, D.C. employment attorney who can discuss your legal options.