Washington: Non-Compete Agreements Unenforceable on Employees Earning Less than $100k

APPLIES TO

All Employers with WA Employees and Independent Contractors

EFFECTIVE

January 1, 2020

QUESTIONS?

Contact HR On-Call

(888) 378-2456

Since 2016, a number of states have amended non-compete statutes to provide greater employee protections.  Washington has followed this trend as of May 8, 2019, passing HB 1450 which establishes a minimum compensation threshold for enforcement of non-compete agreements.

Key provisions of the new statute include the following:

  • The terms of a non-compete agreement must be disclosed to new employees no later than the time the employee accepts an offer of employment. If a new agreement is implemented after employment begins, employers must provide additional consideration (e.g., bonus, promotion, additional wages). If a non-compete is presented to an employee after this time, additional consideration is required (e.g., increased wages, bonus, promotion, etc.).
  • Non-compete agreements are “void and unenforceable” when enacted on employees who earn less than $100,000 per year, or independent contractors who earn less than $250,000 per year from the party seeking to enforce the agreement.
  • This threshold applies to any enforcement proceedings commenced on or after January 1, 2020; as such, agreements executed prior to January 1, 2020 but not acted upon until after the effective date can be retroactively affected by the new statute.
  • The statute broadly defines non-compete agreements as “every written or oral agreement restraining an employee or independent contractor from engaging in a lawful profession, trade, or business,” and further specifies that restrictive periods over 18 months in length are unenforceable by default.
  • Disputes related to non-compete agreements that involve Washington-based employees must be decided in Washington.
  • Agreements that restrict solicitation of former co-workers or outside employment are also unenforceable when enacted on employees earning less than twice the state minimum wage, except under certain circumstances.
  • Employers who wish to enforce non-compete agreements must pay laid-off employees their base wages during the non-compete period.
  • The statute does not apply to non-solicitation or non-compete agreements related to the sale of a business.

Action Items

  1. Review existing and future non-compete agreements with legal counsel for compliance with the new law.
  2. Update hiring procedures to ensure disclosure of non-competes when making offers of employment.
  3. Update termination procedures for laid-off employees to include non-compete wages.
  4. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

© 2019 ManagEase

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