Washington State Law Restricting Non-compete Agreement took Effect January 1, 2020
On May 8, 2019, Washington State Governor Jay Inslee signed a new legislation, ESHB 1450, which created new requirements and restrictions for noncompete agreements under RCW 49.62. This law took effect on January 1, 2020.
Below are major changes:
1) Employers must disclose the terms of the covenant in writing to the prospective employee no later than the time of the acceptance of the offer of employment;
2) Employers must provide independent consideration for the covenant if the covenant is entered into after the commencement of employment;
3) Non competes are void and unenforceable for employees making $100,000 or less in earning annually;
4) If an employee is terminated as a result of a layoff, enforcement of the noncompetition covenant must include compensation equivalent to the employee’s base salary at the time of termination for the period of enforcement minus compensation earned through subsequent employment during the period of enforcement;
5) Restricted period exceeding 18 months are presumptively unreasonable and unenforceable, unless employers can prove by clear and convincing evidence that a duration longer than 18 months is necessary to protect the employer’s business or goodwill;
6) Non competes against an independent contractor are void and unenforceable unless the independent contractor’s earning exceeds $250,000 annually;
7) Non-competes against employees or independent contractors who resides in Washington State are void and unenforceable if the employees and independent contractors are required to adjudicate a noncompetition covenant outside of Washington State;
8) Employees earning less than twice the applicable state minimum hourly wage cannot be prevented from having an additional job, as an independent contractor, or being self-employed;
9) Any violator/employer must pay the aggrieved person the greater of his or her actual damages or a statutory penalty of $5,000, plus reasonable attorneys’ fees, expenses, and costs incurred in the proceeding; and
10) If courts or arbitrators reform, rewrite, modify or partially enforce any noncompetition covenant, the employer must pay the aggrieved person the greater of his or her actual damages or a statutory penalty of $5,000, plus reasonable attorneys’ fees, expenses, and costs incurred in the proceeding.