Business Purchase & Sale Disputes in Washington, DC

One provision makes buying a business in the District materially safer than hiring for it: a seller’s covenant not to compete is excluded from D.C.’s non-compete ban altogether. D.C. Code § 32–581.01(15)(A) carves out a restriction “contained within or executed contemporaneously with an agreement between the seller of a business and one or more buyers of that business.” So while an employee non-compete may be void, the covenant a buyer bargained for in the purchase agreement stands outside the Act.

Why the seller’s covenant survives the non-compete ban

A seller’s covenant not to compete sits outside D.C.’s non-compete ban, because the statutory definition expressly excludes a provision contained in or executed alongside an agreement between the seller of a business and its buyer.

“Non-compete provision” means a provision in a written agreement or a workplace policy that prohibits an employee from performing work for another for pay or from operating the employee’s own business. The term “non-compete provision” does not include an otherwise lawful provision: (A) Contained within or executed contemporaneously with an agreement between the seller of a business and one or more buyers of that business wherein the seller agrees not to compete with the buyer’s business; (B) That prohibits or restricts an employee from: (i) Disclosing, using, selling, or accessing the employer’s confidential employer information or proprietary employer information; (ii) Accepting money or a thing of value for performing work for a person other than the employer, during the employee’s employment with the employer, because the employer reasonably believes the employee’s acceptance of money or a thing of value under such circumstances will: (I) Result in the employee’s disclosure or use of confidential employer information or proprietary employer information; (II) Conflict with the employer’s, industry’s, or profession’s established rules regarding conflicts of interest; (III) Constitute a conflict of commitment if the employee is employed by a higher education institution; or (IV) Impair the employer’s ability to comply with District or federal laws or regulations; a contract; or a grant agreement; or (C) That provides a long-term incentive. (16) “Proprietary employer informati…

D.C. Code § 32–581.01(15) — definition of non-compete provision

Subparagraph (A) is the sale-of-business carve-out. It is a different legal position entirely from the employee covenants discussed at non-compete disputes, and one reason deal covenants should be drafted as deal covenants, not lifted from an employment template.

What usually goes wrong after completion?

How long is there to bring a claim?

Contract claims arising from the purchase agreement generally run 3 years under § 12–301(7), unless the instrument is under seal (12 years, § 12–301(6)) or the dispute is a contract for the sale of goods (4 years, § 28:2–725). Which applies is a question about the document, and it is worth settling early.