For the first time, Washington state has passed a comprehensive law controlling Non-Compete Agreements in Washington State. The status quo of uncertain enforcement and difficult interpretation of “reasonable” agreements provisions are no more. In short, Non-Compete type Agreements for the majority of employees in WA will no longer be enforceable beginning January 1, 2020.
Of course there is always nuance to these types of laws, but the purpose and main points are clear. Prior to the legislation there was significant debate about what is, or is not, reasonable to restrict. My prior article on non-compete agreements detailed the general inquiry Courts would make regarding Non-Competes. It was inefficient and prone to conflict to have to debate the merits of enforcement for even lower paid and non-vital employees. Significant changes are as follows:
- Non-Compete Agreements are not enforceable by default. It is now the Employer’s burden to show that their agreement falls within one of the narrow exceptions.
- Non-Compete Agreements must be provided before the Employee starts work as a part of the offer and acceptance process. Gone are the days where Non-Competes could be slid into the pile of day 1 paperwork. If a non-compete is offered after initial employment it must have independent consideration. This rule appears to be a statutory memorialization of the Labriola holding. Labriola v. Pollard Grp., Inc., 152 Wn.2d 828 (2004).
- Non-Competes are not enforceable against employees who make less than $100,000 a year (W-2 Earnings).This number goes up to $250,000 for independent contractors. I think this limit is important as the most frustrating cases I have litigated were employees making lower wages being prevented from earning a living anywhere near their home. The bullying tactics of some employers was frustrating and unfortunate as the employee frequently did not have the funds to defend themselves.
- Non-Competes are not enforceable against an employee that is laid off from work. UNLESS, the employer is willing to pay the equivalent of the employees’ wages during the non-competition period.
- It is presumed that a Non-Compete longer than 18 months is unreasonable.
- Employers cannot require an employee to adjudicate the non-compete outside of the State. This is an important provision. Even if the employee signs a contract with a “choice of law” or “venue” provision outside of Washington the State will seek to keep the Agreement local and potentially invalidate the Agreement.
There are also some important provisions of the new law that will make unnecessary and overzealous enforcement actions much less likely. Specifically, starting in 2020, attempting to enforce an invalid non-compete can result in the overzealous employer having to pay a penalty, and attorneys fees. If an employer has an employee sign an invalid Non-Compete after January 1st, they could face a penalty regardless of their efforts to enforce the Agreement. Employers should immediately review their agreements to confirm new employees are not signing invalid agreements.
I suspect that non-compete litigation, threats of enforcement, etc. will not disappear in 2020. Rather, there will likely be a burst of activity on these issues as employees who long felt hindered or restrained on non-competes take action. This is exactly what the Washington Legislature arguably wanted – worker mobility.