On January 1, 2020, a new Washington law, Chapter 49.62 RCW: NONCOMPETITION COVENANTS, became effective and substantially limited the use of non-competition agreements in Washington. Before this legislation, employers routinely included non-competition provisions in employment contracts for many types of workers. The new law applies limitations to the use of non-competition agreements by Washington employers.
A Washington employment attorney can explain the new law and how it may apply to your situation.
Employers Must Disclose Terms of Non-Competes
Under the new law, employers must disclose the terms of a non-compete agreement in writing to potential employees before they accept the position. A non-compete is void if an employer imposes it on an employee after the employee accepts an offer of employment.
$100,000 Earnings Requirement
Employees who earn less than $100,000 per year cannot be required to sign a non-competition agreement under the new law. The rationale behind the earnings limit is that people at that level of pay rarely have the proprietary information or unique trade secrets that non-competes are designed to protect.
The earnings threshold is different for independent contractors. An employer can only require a non-compete agreement from independent contractors paid more than $250,000 a year.
These threshold amounts are adjusted annually for inflation.
Non-Competes Limited to the Least Restrictive Terms
In the past, employers tried to draft non-competition agreements as broadly as possible regarding duration and geographic scope. Courts addressed this issue by rewriting agreements they found unreasonably restrictive on employees’ right to earn a living. The new law places the burden on the employer to construct non-competition agreements with minimal restrictions. If a judge or arbitrator finds that a non-compete contains overly broad or unenforceable terms, the employer may be required to pay the employee’s attorneys’ fees and costs, and at least $5000 in damages.
18-Month Time Limit
In the past, employers could prevent former employees from working for competitors for years. Under the new legislation, any non-compete that lasts longer than 18 months is presumed to be unreasonable and unenforceable. For some workers, the allowed duration is much shorter than 18 months. For example, people who perform in the music industry can only be subject to non-compete restrictions for up to three days, due to the nature of their industry.
Side Gigs and Low-Earning Workers
Some non-compete agreements forbid employees from working second jobs. The 2020 non-compete law allows moonlighting by workers who earn less than two times the applicable state minimum wage.
These are but a few examples of how the 2020 legislation changed non-competition agreements in Washington. If you are subject to a non-compete or have been asked to sign one and need advice, we can help you understand whether your agreement is enforceable and explain your options.