With the Federal Trade Commission’s proposed nationwide ban on noncompetes seemingly dead, states continue to march forward with their own regulation of such agreements. Washington’s current law bans noncompetes for employees making less than about $120,000 annually—with a higher limit for independent contractors—and has other restrictions on the terms of any such agreements. But this year, Washington’s legislature is considering pushing those restrictions further with Washington House Bill 1155 (HB 1155).
Proposed Changes Under HB 1155
In January, HB1155 was introduced in the Washington State Legislature to broaden the definition of a “noncompetition covenant” and explicitly prohibit all such “noncompetition covenants.” If passed, Washington would join California, Oklahoma, Minnesota, and North Dakota in banning noncompetes altogether.
Key Provisions of the Bill
- Expanding the definition of a prohibited “noncompetition covenant” to include agreements with performers.
- Explicitly banning the use of forfeiture provisions as an enforcement mechanism for employment contract clauses if the forfeiture is triggered by “the individual engaging in a lawful profession, trade, or business of any kind,” which might affect (e.g.) liquidated damages provisions for violation of confidentiality or other clauses.
- Narrowing the definition of a permitted “non-solicitation agreement,” with the bill stating that any “agreement that directly or indirectly prohibits the acceptance or transaction of business with a customer” is not a “non-solicitation agreement.”
What's Next for HB 1155?
As of right now, the bill is still alive and pending and given the current political environment, probably has a good chance of passing in some form.
Even with a complete ban on noncompetes, the proposal continues to recognize that agreements meant solely to protect trade secrets remain valid. Employers who have carefully crafted contractual provisions and policies to protect legitimate trade secrets should remain able to enforce those provisions even if this bill passes. However, the stakes for such enforcement may be greater, as a poorly-supported trade secrets claim against an ex-employee may not only open up an employer to fee-shifting under Washington’s Uniform Trade Secrets Act but also to damages, penalties, and fees under Washington’s existing noncompete statute.
Employers should examine their existing agreements in light of these developments and we will continue to report on the progress of this bill.
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