While the Federal Trade Commission’s new noncompete ban is facing challenges on multiple fronts, Washington State has enacted its own new restriction on noncompetes. Effective June 6, 2024, employers must comply with the new worker-friendly amendments to Washington State’s existing noncompete law.
WASHINGTON’S EXISTING NONCOMPETE LAW
Under Washington’s existing noncompete law, employers must adhere to multiple provisions to enforce a noncompete. Specifically, in order to have a valid noncompete, employers must comply with the following:
- Noncompetes are void and unenforceable for workers who earn less than the statutory threshold, which increases annually (currently $120,559.99 for employees and $301,399.98 for independent contractors).
- Restricted periods exceeding 18 months are also presumptively unreasonable and unenforceable.
- Employers must disclose the terms of the noncompete in writing prior to the employee’s acceptance of employment.
- If an employer chooses to modify a current employee’s noncompete agreement, the new agreement must be supported with independent consideration.
- For laid-off employees, noncompete agreements are unenforceable unless the employer pays the full base salary through the noncompete period.
- For Washington-based employees, out-of-state forum selection clauses will not be enforced, regardless of where the employer is based.
Washington’s noncompete law creates a cause of action for both the “person aggrieved by a non-competition covenant,” and for the attorney general. Courts are required to implement a $5,000 penalty or actual damages—whichever is greater—plus reasonable attorneys’ fees and costs for violations of the statute or where a judge or arbitrator “reforms, rewrites, modifies, or only partially enforces” a noncompete covenant.
MAJOR AMENDMENTS
SB 5935 increases workers’ protections against employer-imposed noncompete agreements by making several amendments to Washington’s existing noncompete law. Employers now face even greater obstacles entering into and enforcing noncompete agreements.
KEY TAKEAWAY FOR EMPLOYERS
Employers in Washington that have employees or independent contractors should review their existing noncompetition covenants to ensure compliance with SB 5935.
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