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 firstname.lastname@example.org or (206) 447-0182.