What You Need To Know About Washington’s Non Compete Law
In spring 2019, state legislators overhauled Washington’s non-compete laws, which up until then gave employers the power to restrict when and where their former employees could work.
The revamped Non-Compete Act, which went into effect on January 1, 2020, outlaws unfair non-compete agreements that target lower-wage workers by giving them a variety of new protections designed to unlock their economic potential.
It’s a major break from existing laws that have long allowed employers to prevent their workers from leaving to work for a competitor or launching a competing business. Despite these changes, some employers continue to enforce non-compete contracts that greatly limit the employment opportunities of their workforce.
Check out the following Q&A about non-compete agreements in general and Washington’s 2020 non-compete statute specifically to find out if you may have a case against your current or former employer:
What Is a Non-Compete Contract?
A non-compete agreement is a contract that allows employers to prevent employees who sign the agreements from getting a similar job with a company that competes with their current employer. In other words, employees are restricted from using the job skills they have acquired to seek employment in the same market. The agreements are particularly restrictive to lower-wage workers who don’t have the luxury to move to a new market or acquire new skills with each job change.
What Does Washington’s 2020 Non-Compete Law Entail?
Income thresholds: One of the central goals of the new law was to prevent employers from using non-compete agreements on lower-level workers. The law nullified non-competes for W-2 employees who earned less than $100,000 per year and independent contractors who made under $250,000 a year in 2020. In 2021, the Washington state Department of Labor and Industries increased the earnings thresholds to $101,390.00 for employees and $253,475.00 for contractors.
Time limits: The new law limits the duration of non-compete agreements to 18 months after the date an employee leaves a company, unless the employer can prove a substantial business need for it to be longer. Previously, it was not uncommon for non-compete contracts to prohibit hourly workers from leaving one company and joining a competitor for at least two years.
Fair notice: Employers must spell out the terms of a non-compete in writing to any prospective workers before they take the job. Up to this point, companies have typically provided the agreements for an employee to sign on their first day of work, after the worker has accepted a job offer.
Layoff insurance: If an employer wants to enforce a non-compete agreement against a laid-off employee, the business will now have to pay the worker their base salary as long as the agreement is in force, minus all compensation the employee earns from subsequent employment during the same period. Known as “garden leave,” the measure provides workers a form of insurance amid layoffs.
Freedom to moonlight: The new law also affects so-called “moonlighting” policies, allowing any employee who makes less than twice the minimum wage to hold other jobs, unless the extra work would sap all of their energy or pose a danger to themselves or the public.
No poach no more: Franchise operators across Washington state–from Allstate Insurance to Jimmy John’s–can no longer restrict franchisees from hiring away or “poaching” employees from each other.
Employer penalties: Businesses that violate the new law are required to pay the employee a penalty of $5,000 or damages exceeding that amount, plus attorneys’ fees and related costs.
No loopholes: Employees are protected from out-of-state employers seeking to bypass the new non-compete rules by voiding any agreement that requires a Washington employee or contractor to settle the agreement outside Washington or not subject to the law.
Are Any Non-competes Still Enforceable in Washington?
Yes, but only for an employee or independent contractor whose annual income exceeds the current year’s earnings thresholds of $101,390 and $253,475, respectively. As a result, most highly-paid tech workers at companies like Amazon and Microsoft are not protected by the new law. That’s because non-compete agreements make more sense when a departing employee or contractor might join a competing company in exchange for unique trade secrets or other important proprietary information. Some lawmakers said Amazon lobbyists played a role in reducing the law’s originally envisioned salary threshold from $180,000 to $100,000.
Is Washington’s 2020 Non-Compete Law Retroactive?
Yes, but there are a few caveats. While the law invalidates all non-compete agreements signed before January 1, 2020, aggrieved workers will not be able to sue their employer and collect the $5,000 penalty or damages for a pre-2020 non-compete unless the employer is actively enforcing the agreement. If an employer has its workers or contractors sign a non-compete after January 1, 2020 that violates the new law, can sue and collect financial compensation regardless of whether it’s being enforced.
If you signed a non-compete after January 1, 2020, or have a non-compete agreement that needs to be revoked, revised, or reviewed by a professional, call Emery Reddy. You won’t get better advice.