On March 24, 2022, Washington Governor Jay Inslee signed into law ESHB 1795, which generally prohibits nondisclosure and nondisparagement provisions in agreements between employers and employees.  The law, which applies to current or prospective employees and independent contractors, makes void and unenforceable any nondisclosure or nondisparagement provisions that covers conduct an employee reasonably believes under Washington state, federal or common law to be illegal discrimination, harassment, retaliation, a wage and hour violation, or sexual assault, or that is recognized as against a clear mandate of public policy.  

ESHB 1795 law applies to all manner of employer–employee agreements, including settlement agreements.  Acts in violation of the law include requesting or requiring that an employee enter into a prohibited provision, attempting to enforce a prohibited provision, or threatening to enforce a prohibited provision. 

Employers who violate the new law may face significant financial liability.  ESHB 1795 provides for civil penalties of either actual damages or statutory damages of $10,000, whichever is greater.  The law also provides for reasonable attorney’s fees and costs under certain circumstances.

One particularly noteworthy provision of ESHB 1795 is that it applies retroactively to invalidate nondisclosure and nondisparagement provisions in agreements created before the law’s effective date, and that were agreed to during or at the beginning of employment.  The law, however, does not apply retroactively to such provisions contained in settlement agreements.

ESHB 1795 contains a narrow carve out that does not otherwise prohibit an employer from protecting trade secrets and confidential or proprietary information.

This new legislation continues Washington’s trend of heightened scrutiny and legislative narrowing of enforceable employment agreements and restrictive covenants.  Washington currently limits non-compete restrictions to only employees and independent contractors who earn more than certain statutory thresholds. See RCW 49.62.020; RCW 49.62.030.  Non-competes for employees earning below these thresholds are considered void and unenforceable.

ESHB 1795 is slated to become effective on June 9, 2022.  Because the law applies retroactively, however, Washington employers need to take action now to review and update their employment agreements and ensure they are in compliance.