New Washington Law Restricts Non-Competition Agreements

In May 2019, Governor Jay Inslee signed a new bill into law, restricting non-competition agreements in Washington.  The law makes non-competition agreements for employees earning less than $100,000 per year unenforceable.  For employees earning over $100,000 annually, it creates the presumption that such an agreement for a period longer than 18 months is unreasonable and unenforceable.  The law also makes non-competition agreements for independent contractors earning less than $250,000 annually unenforceable.  These salary thresholds will be adjusted annually due to inflation.  The law goes into effect January 1, 2020.

Washington employers wishing to use non-competes with their employees or contractors should ensure they are meeting the salary requirements above.  Employers must also clearly disclose in writing the terms of the non-competition agreement, no later than the time of the acceptance of employment.  If an employer wishes to enter into a non-competition agreement after the commencement of employment, the employer must provide independent consideration to the employee to make the agreement valid.

In a situation where an employee is terminated due to a layoff, a non-competition agreement will be unenforceable unless the employer continues to compensate the employee for the duration of the non-competition agreement.  Lastly, employers should keep the duration of non-compete agreements at 18 months or less, to avoid a presumption of unenforceability.

If you need assistance drafting new non-competition agreements or analyzing the enforceability of your agreements in light of this new law, please contact Margaret Davis at mdavis@davisgrimmpayne.com or (206) 447-0182.

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