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New Washington State Limitations on Noncompetes May Foreshadow Restrictions Elsewhere

    Client Alerts
  • May 20, 2019

Last week, we reported on a new Washington state law that will put the nation’s first public long-term care insurance plan into place. On May 8, Washington’s governor signed into law restrictions on use of noncompetition agreements in that state, which also may become a model for similar efforts in other states. In recent years, noncompetes have been under increasing attack based on claims that they interfere with workforce mobility, suppress wages, and can be used for anti-competitive purposes.

Based on these arguments, Washington will implement new restrictions that will severely limit the use of noncompetition agreements with employees and independent contractors beginning in 2020. Some of the legislation’s highlights include:

  1. A ban on use of noncompetes with employees earning less than $100,000 annually or contractors earning less than $250,000.
  2. Noncompetes will be presumed unreasonable if they extend more than 18 months.
  3. The noncompete must be signed at the beginning of employment unless additional consideration is paid to the employee.
  4. If the employee is laid off, the noncompete will only be enforceable if the employee is paid during the restricted period.

The law also restricts employers from limiting moonlighting for lower paid employees, and it prohibits franchisors from requiring franchisees to sign employee “no-poaching” agreements. The new law does not restrict non-solicitation or confidential information agreements with employees.