Washington Raises Income Thresholds for Workers Subject to Noncompetition Covenants
In May 2019, Washington enacted restrictions on noncompetition covenants, which we wrote about in our article, “Washington State Governor Signs Legislation Restricting Noncompetition Covenants,” and which took effect on January 1, 2020.
One of Washington’s new restrictions, contained in Chapter 49.62 of the Revised Code of Washington (RCW), prohibits “noncompetition covenants” (as defined in RCW 49.62.010) for employees earning less than $100,000 in annualized income, adjusted each year for inflation by the Washington State Department of Labor and Industries (L&I). The law similarly prohibits noncompetition covenants for independent contractors who earn less than $250,000.
As required by RCW 49.62.040, L&I on September 30 of each year must adjust for inflation the income thresholds for noncompetition covenants for employees and independent contractors. Effective January 1, 2021, the adjusted amount for employees is $101,390 (as reported in Box 1 of the federal Form W-2), and the adjusted amount for independent contractors is $253,475.
Employers may draft noncompetition covenants to become effective once a worker earns a sufficient amount to satisfy the income threshold.