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Washington State Governor Signs Legislation Restricting Noncompetition Covenants

On May 8, 2019, Washington State Governor Jay Inslee signed new restrictions on noncompetition covenants for Washington employees. The new restrictions are effective January 1, 2020. Key elements of this new law include the following:

Income Threshold

Only employees earning more than $100,000 (or inflation-adjusted amounts) in box 1 of the W-2 or independent contractors earning more than $250,000 (also adjusted for inflation) may have noncompetition covenants. NOTE: Employers may draft noncompetition covenants to become effective once a worker earns a sufficient amount to satisfy the income threshold.

Duration

Noncompetition covenants with a duration of 18 months or less are enforceable. Noncompetition covenants with a duration longer than 18 months are presumed unreasonable and unenforceable absent clear and convincing evidence of the necessity for the longer term.

Noncompetition Covenants

The new law broadly defines noncompetition covenants. It excludes nonsolicitation agreements, confidentiality agreements, trade secret and invention agreements, or agreements related to the sale of a business or franchise from the definition of noncompetition covenants.  Nonsolicitation agreement is a defined term as it relates to nonsolicitation agreements between employers and employees.

Consideration and Notice

The employer must provide notice of the terms of a noncompetition covenant prior to the acceptance of the offer of employment.

To ensure that agreements are supported by adequate consideration, employers should continue to enter into noncompetition covenants at the start of employment.

Noncompetition covenants entered into after the start of employment must be supported by independent consideration.

Layoffs

If employment ends because of a layoff, the employer may have to pay the employee’s base pay during the noncompetition period to have an enforceable agreement. The law does not define “layoff.”

Forum Selection and Choice of Law

Agreements for “Washington-based” employees may NOT select a forum outside Washington or choose a different state’s law that deprives “Washington-based” employees of the benefits of Washington law.

Pre-2020 Agreement Enforcement

If, after January 1, 2020, a company has a pre-2020 noncompetition covenant but does not attempt to enforce that covenant, the employee does not have a private right of action/counterclaim.

If, after January 1, 2020, a company attempts to enforce a pre-2020 noncompetition covenant that may violate the new law, the court may modify the agreement to make it enforceable. If the agreement is modified or if the employee brings a counterclaim, the company may be required to pay the greater of actual damages or $5,000 plus attorneys’ fees, expenses, and costs.

Post-2020 Agreement Enforcement

For agreements entered into on or after January 1, 2020, if the noncompetition covenant is deemed to violate the new law, is rewritten or modified, or is only partially enforced, the attorney general or the employee may pursue a claim or counterclaim for the greater of actual damages or $5,000 plus attorneys’ fees, expenses and costs.

More information about this new law can be found in our April 2019 article, “Washington State Legislature Adopts Law Restricting Noncompetition Agreements.”

© 2019, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

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About this Author

Adam Pankratz, Ogletree Deakins Law Firm, Labor and Employment Litigation Attorney
Shareholder

Mr. Pankratz represents corporations and management in a myriad of employment-related and complex commercial matters, including litigation involving discrimination, retaliation, harassment, wage and hour, wrongful termination, ADA and FMLA leave issues, and other matters in state and federal courts and administrative agencies. Mr. Pankratz has experience successfully representing employers in executive termination, non-compete and unfair competition disputes.  Mr. Pankratz has extensive experience representing employers both locally and nationally on various employment...

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Associate

Kyle is an advisor and employment litigator in Ogletree Deakins' Seattle office. He represents employers in state and federal courts, as well as before administrative agencies.

Kyle has experience handling employers against alleged claims for discrimination, harassment, retaliation, constructive discharge, and wrongful termination. 

Kyle also has experience in employee non-compete, non-disclosure, non-solicitation, and misappropriation of trade secret claims. Prior to joining Ogletree Deakins, Kyle practiced at a boutique IP firm. In this capacity, he focused on the intersection of IP and employment law, including appreciable experience in employee noncompete and trade secret disputes.

Kyle's litigation experience includes arguing motions at the trial court level and before the Washington State Court of Appeals. He has participated in federal jury trials and labor arbitrations, as well as taken and defended depositions in employment litigation.

Education

  • J.D., summa cum laude, Gonzaga University School of Law, 2015
  • B.A., magna cum laude, Washington State University, 2011

Admitted to Practice

  • Washington
  • U.S. District Court, Eastern and Western Districts of Washington
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Of Counsel

Jaime has spent most of her career advising major corporations, whether in-house or at Ogletree.  Prior to starting with Ogletree Seattle, Jaime worked for Target Corporation in Human Resources for both the stores and distribution after college.  While working for Target Corp., she implemented HR policies and procedures for the stores, helped create a centralized recruiting program for the distribution centers, and worked extensively on employee relations issues.  Upon graduation from law school in 2004, Jaime began her legal career with the Atlanta office of Ogletree...

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