Over the past decade or so, non-competition agreements have been the target of increasingly active state and local efforts to limit their scope and application or ban them outright. Given that the validity and enforceability of non-competes have long been considered matters of state law and jurisprudence, the proliferation of such measures at the state level is unsurprising.
However, during the Biden administration, attempts to restrict non-competes became a matter of federal policy and regulation as well. As we discussed in previous posts, both the Federal Trade Commission (FTC) and the National Labor Relations Board (NLRB) took the position, in a Final Rule and General Counsel Memoranda, respectively, that almost all existing and future non-competes were void and unenforceable. The FTC’s actions were immediately challenged in court. Litigation over the FTC's ban resulted in conflicting district court rulings, with injunctions issued against its enforcement in some cases, while other judges found the FTC had properly issued the Final Rule. The FTC subsequently appealed federal court rulings in Texas and Florida that, respectively, invalidated or enjoined the FTC's non-compete ban.
Then came Election Day.
NLRB Rescinds General Counsel Memoranda on Non-Competes and the Current Administration Seems Unlikely to Preserve the FTC's Non-Compete Ban.
The new administration has taken steps to reverse or pause the efforts of the Biden Administration.
First, on February 14, 2025, NLRB Acting General Counsel William B. Cowen rescinded General Counsel Memoranda GC 23-08 and GC 25-01 which limited the use of non-competes.
Next, on March 7, 2025, the federal government filed motions seeking 120-day stays of its two pending appeals challenging adverse rulings against the validity and enforceability of the Final Rule. The motions cited comments by the newly appointed FTC Chairman Andrew Ferguson, who opposed the ban as a member of the Commission. Ferguson stated, "My view is that the Commission … basically needs to decide whether it's a good idea [and] it's in the public interest to continue defending this rule. I'm going to be presenting at some point [to] my colleagues the decision about whether to continue defending this rule."
Until a decision is made about the Final Rule, existing and new non-compete agreements remain valid and enforceable under federal law (subject to applicable state laws and judicial interpretations). It isn't difficult to imagine, however, that the current administration and FTC leadership will ultimately choose to abandon their appeals and withdraw the non-compete ban altogether.
If it does so, the legal landscape governing non-competes will once again exclusively be a matter of state law and local ordinances. Maryland, Virginia, and Washington, D.C., are among the many jurisdictions that now ban non-competes for employees earning less than a specified salary/wage threshold. In the case of Virginia, a recent amendment to its non-compete law has significantly expanded the pool of workers who cannot be subject to such agreements.
Compliance with Non-Compete Laws in Maryland, Virginia, and D.C. is no Easy Task.
It is not uncommon in our area for employers to operate in Maryland, Virginia, and/or D.C. - and to have employees in one or more of these jurisdictions. Employers should be aware, however, that the laws restricting the use of non-competes in these jurisdictions are very different, which means employers will need to adjust their non-compete strategy depending on where the employees work.
Maryland Non-Compete Law
Maryland began applying income restrictions on non-competes in 2019 when it voided non-competes and conflicts of interest provisions restricting competitive employment or self-employment for employees earning less than a designated income threshold. In 2023, Maryland updated its non-compete statute to raise the threshold to 150 percent (150%) of the state's minimum wage, which is currently $15 an hour. That means that non-competes and conflict of interest provisions restricting competitive employment or self-employment are void and unenforceable for employees earning $22.50 or less per hour.
In 2024, Maryland again expanded its restrictions on non-competes, banning them for veterinarians and veterinary technicians, regardless of the amount earned by such personnel. It also imposed a “low wage” threshold for some healthcare providers working in direct patient care and making $350,000 or less in total compensation annually. For direct patient care health care providers earning more than $350,000 per year, non-competes must be limited to one year in duration and ten miles in geographic scope. The law will also require the employer of covered health care providers earning more than $350,000 per year to provide patients with the new work location of the health care provider upon request. These provisions take effect July 1, 2025.
Virginia Non-Compete Law
In Virginia, employers are prohibited from entering into non-competes with "low-wage employees" whose average weekly earnings fall below the Commonwealth's average weekly wage. For 2025, that figure is $1,463 per week, or $76,081 annually. The law also prohibits non-competes with independent contractors who are paid less than the median hourly wage, which has not been released for 2025.
However, on March 24, 2025, Gov. Glenn Youngkin signed into law an amendment to Virginia's non-compete statute that expanded the definition of "low-wage employees" to include any employee who, regardless of their average weekly earnings, is entitled to overtime compensation under the federal Fair Labor Standards Act (FLSA). In other words, employers may not require non-exempt employees to sign non-competes, no matter how highly they are paid. That amendment takes effect on July 1, 2025.
Virginia's non-compete statute also provides a private right of action for low-wage employees against an employer that tries to enforce a non-compete in violation of the statute. A prevailing employee can recover liquidated damages, lost compensation, and attorneys' fees, and employers may also face civil penalties of up to $10,000 for each violation.
Washington, D.C., Non-Compete Law
Since October 2022, the District of Columbia has banned non-competes for expansively defined "covered employees," which includes any employee who spends more than 50% of their time working in the district or an employee whose employment is based in D.C. and spends less than half of their time working in a different jurisdiction.
D.C.'s non-compete law does allow for such agreements with a "highly compensated employee," defined as an employee who is reasonably expected to earn at least the minimum qualifying annual compensation of $150,000 in a consecutive 12-month span or whose compensation was at least the minimum qualifying compensation in the consecutive 12-month span immediately preceding the non-compete term. If the employee is a "medical specialist," such as a licensed physician or surgeon, the minimum compensation is increased to $250,000.
While D.C.'s statute permits non-competes for highly compensated employees, those agreements must be limited in scope and duration depending on the category of employee, as set forth in the statute linked above. Non-competes must be provided to new hires 14 days before employment begins and to current employees 14 days before they are required to sign the agreement.
Employers are prohibited from retaliating against covered employees because they ask about or object to non-compete provisions they believe do not comply with the law, whether their questions or objections are raised internally or externally. Employers should exercise caution before terminating an employee for not signing a non-compete when required as a condition of employment or continuing employment by first investigating whether the employee has engaged in these protected activities.
What Employers Should Do Now
The bottom line for employers is that, for the moment and perhaps indefinitely, state law and jurisprudence govern the validity and enforceability of non-competition agreements. Tydings will continue to monitor developments involving the FTC's posture on its non-compete ban, as well as any other relevant changes, and provide updates accordingly. Meanwhile, employers with employees in Maryland, D.C., or Virginia should familiarize themselves with the complexities of existing and amended non-compete laws to ensure compliance. If you have questions or concerns about your business’ use of non-competes, please contact Melissa Jones at Tydings.