Is Your Non-Compete Agreement Enforceable?

In Washington State, Non-Compete Agreements (NCAs) are enforceable, but the Courts often frown upon them.

Lately I have received an increase in inquiries regarding the enforceability of NCAs. These calls come from a variety of sources: individuals leaving a position for greener-pastures; concerned business owners dealing with a messy separation; and former employees opening their own business. I think I have received more calls because many employers add generic language to their employment agreements without clear analysis as to best practices or if it makes sense in the context of specific positions.

The purpose of this article is to provide a general understanding of how to approach NCAs and address these general contextual and enforceability concerns. If you would like an excellent policy discussion of NCAs and their role in Washington State I highly recommend this article by GeekWire which goes into detail.

Questions to Consider When Assessing the Enforceability of an NCA

Though the non-compete provisions I see tend to be similar, the context is not, and will have considerable impact as to the NCA’s enforceability. To determine the context, and tailor advice an attorney typically asks employers or employees a series of questions:

  • What position or special skill set does the employee have? Are those skills general, or something that only the employer could teach?
  • What was the employee’s position? Did he or she have access to proprietary information, client details, or other potential trade secrets within the company?
  • What is the employee’s new position? Does it even compete? Is there any real threat to the employer’s bottom line?
  • What is the focus of the NCA? Is it preventing competition – something that is often viewed negatively; or preventing the taking of trade secrets or clients, something that is frequently viewed as fair?
  • What activities are being prohibited? If it is the use of trade secrets or proprietary information, Washington law already provides protections against improper use of trade secrets. Is it prohibition of the solicitation of clients, customers, co-workers, vendors etc.? Is it prohibition of performing similar work for a competitor, or prohibition from performing any similar work at all?
  • How long is the prohibition? The longer the prohibition the less likely a Court is to enforce it. I typically see one year as the most common. Depending upon how severe the prohibition is may also impact how long a time period is considered appropriate.
  • What is the geographic scope of the NCA? Where does the employer obtain their clients from? Does the geographic scope have any tie to the reality of the business? i.e. a local shop vs. regional company.

WA Courts will look at the above and may rewrite or remove overly broad and unenforceable provisions (“blue pencil rule”). Employers and employees should avoid the uncertainty a rewrite of unenforceable provisions cause.

What are the Characteristics of the Best NCA’s?

The best NCA’s are clear agreements that fit the actual needs of the employer in regards to the specific employee without being overly prohibitive. This may include a focus on things such as solicitation of clients or improper use of proprietary information. It may also be narrowly tailored to provide only the protective time or geography that is actually necessary. Finally, the NCAs I like best provide a mechanism allowing both the employer and employee to verify and communicate that a subsequent position is not a violation, or how to insure there is no violation when it may be less certain.

What Happens when either an Employee or an Employer has NCA related Concerns?

I encourage all clients, and potential clients, to address any concerns PRIOR to a potential breach. A preliminary conversation between an experienced employment attorney and an employee or employer is quick and affordable in comparison to actual litigation to enforce or prevent enforcement of the NCA. This conversation also offers confidence when moving into a new job, or fairly enforcing the NCA. Fortunately I find that most employers can easily work with an employee to confirm the NCA is not being violated with a new position, or to craft an agreeable protective plan.

If you have specific questions regarding your Non-Compete Agreement, you can follow up with Noah Williams at (206) 624-6271.

UPDATE: See our new blog post for 2016 Washington state legislature updates.