With the new year fast approaching, employers with Washington-based workers should ensure—if they have not already—that they are prepared to comply with legal changes substantially limiting the enforcement of non-compete agreements. As you may recall from our previous client alert on this topic, the new law (RCW ch. 49.62) goes into effect January 1, 2020, and will impact all non-compete agreements with Washington employees—even those entered into before 2020.
Employers are encouraged to confer with counsel to address any required updates to agreements used with new employees going forward, as well as to assess whether current employees should be notified of changes that may affect the enforceability of their existing agreements.
As described more fully in our earlier client alert, key highlights of the new law include the following requirements:
- Advance notice of the non-compete terms, given in writing prior to an employee’s acceptance of an employment offer (or adequate consideration, like a raise or a bonus, if entered into later).
- Minimum compensation thresholds for non-competes to be enforceable (cash compensation must exceed $100,000 in 2020; adjusted for inflation in future years).
- Disclosures to employees not meeting the compensation threshold, notifying them that the non-compete may be enforced in the future if and when compensation exceeds the minimum threshold.
- Maximum 18-month non-competition period under most circumstances, with courts retaining discretion to strike down shorter periods.
- Payment of “garden leave” salary continuation in order to enforce non-competes with employees affected by certain layoffs.
- Limitations on non-moonlighting clauses for certain lower-wage employees earning less than twice the then-current state minimum wage.
As a reminder, and as noted in our previous client alert, failure to comply with the new requirements could render non-compete agreements void and unenforceable. Among other penalties, employers could also be required to pay the attorneys’ fees of employees who challenge the enforceability of agreements that do not comply with the new law.