Non-compete agreements are controversial in some circles. Proponents believe they protect trade secrets, while many critics argue they stifle innovation and worker opportunities.
Regardless of your personal beliefs about non-compete agreements, you need to know how recent changes to Washington State law will affect your business. A Washington non-compete law that affects both existing and new agreements went into effect on January 1, 2020.
Here are the most important facts to understand:
Your prior non-compete agreements might not be enforceable
Ever since 2020, non-compete agreements that do not meet certain standards are void in Washington State. Both new and previously existing noncompetition agreements must comply with the new law.
Non-compete agreements are only enforceable if:
- An employee, or independent contractor earns more than a certain amount of money from the employer. This amount is adjusted for inflation each year, as described below.
- The employer discloses all the terms of the non-compete during or before making an offer, or provides additional compensation if the employee is already employed with the employer.
- The employer compensates employees that are laid off for the duration of the time period when they are still subject to non-compete agreements.
- The agreement does not cover a period longer than 18 months.
Here are the minimum income thresholds for enforceable non-compete agreements:
|Type of Worker||2020 Thresholds||2021 Thresholds||2022 Thresholds|
|Independent Contract Worker||$250,000.00||$253,475.00||$268,252.59|
Any noncompetition agreements that require applying non-Washington law or adjudication outside of Washington State are void. Noncompetition covenants that extend beyond 18 months post-termination are considered unreasonable and unenforceable, except in rare circumstances.
Employers should also note that they generally may not prohibit employees from having additional employment if they earn less than twice the state minimum wage.
The non-compete law applies to all kinds of employers, including franchisors. Franchisors may not prevent franchisees from hiring employees or other franchisees of the same franchisor.
In addition to unenforceability, employers can face penalties for non-compete covenants that do not comply with the new law.
You can still sign and enforce non-solicitation agreements
Employees who make less than the minimum salary for non-competes can still sign non-solicitation agreements. While non-solicitation agreements are not as restrictive as non-competes, they can still ease some employer concerns.
A non-solicitation agreement is a document in which the employee agrees that they will not actively solicit customers or employees away from a business for a period of time after leaving. Essentially, these agreements prevent recent former employees from “stealing” clients or talent.
A non-compete agreement prevents a former employee from working for another company in the same industry. On the other hand, a non-solicitation agreement simply limits the extent to which they can compete with their former employer. The employee can still begin other work in the same industry and geographic area, which they would not be able to do with a non-compete agreement.
For example, a former employee who signed a non-solicitation agreement could not legally solicit business from their former employer’s clients for a set period of time. If they left the company that they signed an agreement with, started their own business, and then actively solicited clients from their former company, they could get an injunction from the court.
An employment law attorney can help you draft or understand a contract
If you need help creating a non-compete or non-solicitation contract, you should get in touch with an employment law attorney. An experienced professional can help you understand your legal rights. They can also draft a new agreement that meets all the legal requirements for businesses and employees in your state.
Anderson Hunter provides practical solutions to employment law issues, from navigating employee leave requests to conducting personnel investigation. We also litigate on behalf of employers.
We can help you draft a non-compete or non-solicitation agreement that meets current laws, keeping your business protected from legal penalties. Contact us today to get help with your non-compete agreements.