The Washington state legislature and certain localities recently passed several bills affecting employers, some of which have already been signed into law. These measures address non-compete agreements, mandatory employer-sponsored meetings, immigration reporting, paid leave, and the minimum wage. Each new bill or ordinance is discussed below.

New Law Expands and Clarifies Non-Compete Statute

On March 13, 2024, Governor Jay Inslee signed into law Substitute Senate Bill 5935 (S.B. 5935), amending Washington’s 2019 non-compete statute (RCW 49.62) and expanding the already significant restrictions it places on employers doing business in Washington. The bill will become effective on June 6, 2024. Employers with Washington operations that have (or want) non-compete or non-servicing agreements with their employees, or that are considering hiring individuals who have entered into such agreements with other employers, need to understand the implications of these changes.

The amendments are intended to address and clarify certain provisions of the 2019 law that the Washington legislature has said courts have misconstrued or misinterpreted. Below are the most significant changes:

Expands Definition of “Noncompetition Covenant”: S.B. 5935 amends the definition of “noncompetition covenant” in RCW 49.62.010(4) to include agreements that prohibit a former employee or independent contractor from accepting or transacting business with a customer. This amendment is aimed at rectifying recent court decisions that have found nonacceptance of business clauses to be non-solicitation covenants, and thus, excluded from the strict enforceability requirements of RCW 49.62.

Limits the Sale of Business Carve Out: The definition of regulated “noncompetition covenants” specifically excludes, among other agreements, covenants entered into in conjunction with the purchase or sale of a business. S.B. 5935 limits this exclusion to apply only to the purchase or sale of 1% or more of the business. This new 1% requirement narrows the sale of business exclusion in RCW 49.62.010(4) in an apparent attempt to prevent employers from claiming it applies to “non-competition covenants” contained in many employees’ equity grant agreements.

Limits the Non-Solicitation Carve Out to Current Customers Only: As mentioned, employee and customer non-solicitation agreements are excluded from coverage of Washington’s non-compete statute. S.B. 5935 amends the definition of a “nonsolicitation agreement” to clarify that this exclusion applies only to covenants that prohibit the solicitation of “current” customers of the employer.

Clarifies the Timing of the Prior Notice Requirement: RCW 49.62.020(1)(a)(i) requires employers to disclose the terms of the “noncompetition covenant” in writing to prospective employees no later than the time the employee accepts an offer of employment. If the employer fails to do so, the covenant is void and unenforceable. In response to a recent court ruling that an initial verbal acceptance of a job offer did not trigger the notice requirement, S.B. 5935 clarifies that is not case – notice of the covenant must be provided no later than the “initial verbal or written acceptance” of employment. This suggests that the safest practice would now be to provide notice of the covenant along with (if not prior to) any verbal offer of employment since this event will often occur prior to an official offer letter.

Clarifies Washington Venue and Choice of Law Provisions: S.B. 5935 amends RCW 49.62.050 to render “void and unenforceable” contract provisions in a noncompetition covenant signed by a “Washington-based” employee or independent contractor if (1) the choice-of-venue provision requires adjudication outside of Washington; (2) deprives the employee the protections or benefits of the statute; or (3) “allows or requires the application of choice of law principles or the substantive law of any jurisdiction other than Washington state.” This change is directed at courts that have required Washington-based employees to litigate outside of Washington and applied non-Washington law based on the prior wording of Section 49.62.050. Notably, the statute does not define “Washington-based,” although, in deciding choice-of-law issues, Washington courts focus on the location of the employee’s work site and residence as principal guiding factors.

Expands Retroactive Application: The original RCW 49.62.080(4) limited the statute’s intended retroactive effect by prohibiting declaratory actions regarding a noncompetition covenant signed prior to January 1, 2020 “if the noncompetition covenant is not being enforced.” Recognizing that some employers may take other actions short of litigation (like demand letters) to give effect to a noncompetition covenant, S.B. 5935 amends this section to permit declaratory actions based on pre-January 1, 2020 covenants if they are being “explicitly leveraged.” What it means to “explicitly leverage” something is inherently unclear and will almost certainly be fuel for many legal disputes.

Expands Who May Bring a Private Right of Action to Challenge a Noncompetition Covenant: RCW 49.42.080 previously provided that only a party to a non-competition covenant could bring a cause of action challenging the covenant. S.B. 5935 removes that limitation and provides that any “person aggrieved by a noncompetition covenant” may bring a cause of action. What constitutes being “aggrieved” is not clear. Whether this will be interpreted to include an employee’s new employer, or some other party impacted more indirectly by an agreement waits to be seen.

Practical Considerations: Employers with Washington-based employees should review their existing noncompetition covenants to ensure compliance with S.B. 5935 before the law takes effect in June 2024. Employers should also review any protocol and standardized communications used with exiting employees to help guard against inadvertently creating communications that could be viewed as “explicitly leverag[ing]” pre-January 1, 2020 covenants that now run afoul of the statute. Certainly, employers will want to be more careful with the use of demand letters and threatened litigation. Because of the significant changes imposed by the law, employers should consult with experienced employment counsel when drafting or proposing noncompetition agreements for Washington-based workers and prior to sending out demand letters or taking other steps to enforce such covenants against former employees or independent contractors. Employers should also review, and if need be revise, their job offer processes to ensure that new employees receive timely notice of any noncompetition covenant, and train managers and supervisors accordingly.

Bill Seeks to Ban Mandatory Employer-Sponsored Meetings

The Washington legislature passed Senate Bill 5778, referred to as the “Employee Free Choice Act,” and delivered the bill to Governor Inslee on March 8, 2024 for his signature. If the bill is signed, Washington will join the growing list of states prohibiting certain mandatory employer-sponsored meetings, including meetings to discourage unionization.

The bill, which would become part of Chapter 49.44 of the Revised Code of Washington if enacted, would prohibit employers from requiring employees to attend company-sponsored meetings in which the primary purpose is to communicate the employer’s opinion concerning “religious or political matters.” By broadly defining “political matters,” this bill would significantly restrict employers’ ability to require employees to attend meetings that include communications on several topics.

“Religious Matters” Defined: “Religious matters” are matters “relating to religious affiliation and practice, and the decision to join or support any religious organization or association.”

“Political Matters” Defined: “Political matters” are matters “relating to elections for political office, political parties, proposals to change legislation, proposals to change regulations, and the decision to join or support any political party or political civic, community, fraternal, or labor association or organization.”

Prohibitions: The bill would prohibit employers from penalizing, discharging, or taking adverse employment action against any employee who does the following:

• Refuses to attend or participate in an employer-sponsored meeting where the primary purpose is to communicate the employer’s opinion concerning religious or political matters;
• Refuses to listen to speech or view communications (including electronic communications) for which the primary purpose is to communicate the employer’s opinion concerning religious or political matters; and
• Makes a good-faith report of a violation or suspected violation of this section.

Notice Posting: The bill would require employers to post a notice of employee rights under this section in a place normally reserved for employment-related notices and in a place commonly frequented by employees.

Private Right of Action and Remedies: An aggrieved employee could bring a civil action in superior court no later than 90 days after the date of the alleged violation. A prevailing aggrieved employee would be entitled to injunctive relief, reinstatement to their former position or equivalent position, back pay and reestablishment of employee benefits (including seniority), and “any other appropriate relief as considered necessary by the court.”

Limitations: The bill specifically would not prohibit an employer doing the following:

• Communicating to its employees any information that the employer is required by law to communicate “(but only to the extent of the legal requirement)”;
• Offering meetings, forums, or other communications about religious or political matters for which attendance or participation is strictly voluntary;
• Communicating to its employees any information, or requiring employee attendance at a meeting or other events, that is necessary for the employees to perform their lawfully required job duties; and
• Requiring employees to attend training intended to reduce and prevent workplace harassment or discrimination.

Exemptions: Religious corporations, entities, associations, educational institutions, or societies that would be exempt from the requirements of Title VII with respect to speech on religious matters are exempted from the restrictions in this bill.

Interaction with Constitutional and Federal Labor Law: Similar legislation in various states banning and/or restricting employer-sponsored meetings has been challenged on constitutional and federal preemption grounds, and such challenges are ongoing. At the federal level, NLRB General Counsel Jennifer Abruzzo has pressed forward to interpret the National Labor Relations Act as prohibiting such meetings despite similar ongoing legal challenges.

Littler will continue to monitor the development of this bill. Employers are strongly encouraged to consult with labor and employment counsel in order to make necessary plans before its adoption.

Washington Employers May Face Increased Scrutiny under New H-2A Reporting Obligations

On March 5, 2024, the Washington legislature passed Substitute House Bill 2226 (H.B. 2226) to enable the state to collect additional data about H-2A workers employed in the state. The bill was sent to Governor Inslee on March 7, 2024, for his signature, which is expected to follow. As detailed below, H.B. 2226 directs the state Employment Security Department (ESD) to survey H-2A workers directly and collate the data for annual reporting. While this bill does not impose any requirements on employers directly, given the additional reporting requirements, there will likely be additional field checks and visits by the ESD going forward.

The H-2A program is a federal immigration program that provides visas to allow foreign guest workers to work temporarily in agriculture where there are not enough domestic workers to fill those positions. H.B. 2226 is meant to address alleged underreporting and misinformation from employers utilizing the H-2A program. Although the H-2A program is federal in nature, the United States Department of Labor charges the state ESD with administering certain aspects of the program.

As part of this administration the ESD currently conducts wage surveys of employers and some farmworkers, which are done via paper. It also currently conducts two types of in-person visits. The first, field visits, are scheduled in advance and are used to educate employers and H-2A farmworkers on their rights and responsibilities, provide information on employment services, and to observe working and living conditions for the workers. The second, field checks, are random and unannounced, to ensure compliance with H-2A requirements on wages, hours, and working and housing conditions. H.B. 2226 imposes two additional requirements on the ESD during these visits, but does not require any additional visits from the ESD.

Data on H-2A Workers in Washington: Whenever the ESD conducts a field check or field visit, H.B. 2226 requires the ESD to collect the following information:

1. A count of the number of H-2A workers the employer has working at each work site; and
2. The actual geographic location where the H-2A workers are living during their employment with the employer.

H.B. 2226 directs that the ESD compare the information submitted with the employer's H-2A application and the number of H-2A workers actually working for the employer. The bill does not detail what, if any, impact a mismatch on the field count and the H-2A application would have on employers although it may be used to adjust the number of H-2A approvals in Washington in the future.

Annual Survey of Hand Harvesters: The ESD must conduct an annual field survey of hand harvesters of apples, cherries, pears and blueberries, who are not H-2A workers. The survey will include incentive payments for survey respondents to participate in the survey. The survey will gather demographic data (age and gender), whether born in the United States and/or years of residency in the United States, current wage rates, and any unemployment claims they have filed. Littler will continue to monitor the development of this bill.

Washington Seeks to Expand the Covered Uses and Definition of Family Member Under the State’s Paid Sick Leave Law

The Washington legislature passed Senate Bill 5793 and delivered the bill to Governor Inslee on March 7, 2024 for his signature. If signed, the bill would have an effective date of January 1, 2025.

The bill proposes to amend RCW 49.46.210 to expand the covered uses for business or place of care closures to include a public emergency for both employers generally and Transportation Network Companies specifically. The bill does not define “public emergency” and could include extreme weather events.

S.B. 5793 would also expand the definition of “family member” to include any individual who regularly resides in the employee’s home or where the relationship creates an expectation that the employee will care for the person, and that individual depends on the employee for care. It will not include an individual who simply resides in the same home with no expectation that the employee will care for the individual. This is similar to the definition under the Washington Paid Family and Medical Leave Act, RCW 50A.05.010. The definition of “child” will also be expanded to include a child’s spouse. And finally, “grandchild” and “grandparent” will be defined to mean the employee’s grandchild or grandparent.

As a reminder, under current law, employees can use paid sick leave:

• For the employee’s own mental or physical health reasons, including recovering from illness or injury, or seeking diagnosis or treatment for a condition.
• For the employee to care for a family member with mental or physical health needs. “Family member” currently includes the employee’s child, parent, spouse/domestic partner, grandparent, grandchild, or sibling.
• When the employee’s place of business or their child’s school or childcare facility has been closed by a public official for health reasons.
• When the employee qualifies under the Domestic Violence Leave Act.

Washington Cities Enact Higher Minimum Wages

Adding to the list of Washington cities with their own minimum wages – Seattle, Tukwila, and SeaTac (in the hospitality and transportation industries) – Washington voters in Bellingham and Renton and the City Council in Burien have voted to increase the minimum wage in their cities. A proposal is also being considered for unincorporated areas of King County, the most populous county in Washington. We provide a brief summary below.

As with prior city ordinances, the cities have provided for annual increases in their minimum wage, though they have used different approaches. Increases in the Bellingham and Burien minimum wages will be tied to the state minimum wage. Renton initially tied its minimum wage to nearby Tukwila’s and provided for subsequent increases tied to inflation. Inflationary increases are typically announced in September or October each year.

* Some cities permit temporarily lower minimum wages based on employer size, or a limited credit for items such as tips or medical benefits.

With the blossoming local activity, employers doing business in Washington will need to be vigilant about the cities where their employees are working (including remote locations) to ensure compliance with this patchwork of laws. In addition, some of the local minimum wage laws include other requirements, such as paid sick leave and offering additional hours of work to part-time employees, which add to the complexity.