It took us a while to get to this, but better late than never. Starting in January 2020, Washington will have a new law that significant impacts the enforceability of non-competition agreements for employees and contractors.
Generally, the new law requires the following for a covenant not to compete to be enforceable:
- Employee must earn more than $100,000 annually or the contractor must make more than $250,000 per year from the party seeking enforcement of the non-compete
- Employee must be told in writing of the terms of the non-compete before acceptance of an offer of employment
- Independent consideration must be provided if the non-compete is entered into with an existing employee
- Restriction must be 18 months or less
- If the employee is laid off, the non-compete is enforceable only if the employee is compensated for the period of enforcement minus compensation otherwise earned by the employee during the period of enforcement
The law does not bar non-solicitation agreements, confidentiality agreements or non-competition agreements entering into in connection with the sale of a business.
The law includes the following definitions:
- A “noncompetition covenant” includes every written or oral covenant, agreement, or contract by which an employee or independent contractor is prohibited or restrained from engaging in a lawful profession, trade, or business of any kind.
- “Earnings” means the compensation reflected on box 1 of employee’s W-2 during the prior year or payments reported on a 1099-MISC for independent contractors.
- Advance notice requires the employer to disclose the terms of the covenant not later than the time of the acceptance of the offer of employment.
The law also provides that a provision in a noncompetition covenant signed by an employee or independent contractor who is Washington-based is void and unenforceable if the covenant requires the employee or independent contractor to adjudicate the noncompetition covenant outside of Washington and to the extent it deprives the employee or independent contractor of the protections or benefits of the new law.
The complete text of the law is here: Washington Non-Compete Law (03183674x7AC43)