New law effectively bars most non-compete agreements

MOSES LAKE — It’s going to be tougher for employers across Washington to enforce non-compete clauses in employment contracts in the new year.

A new state law that went into effect on Jan. 1 will effectively make it impossible to enforce non-competition clauses in employment agreements against employees who make less than $100,000 per year or independent contractors making less than $250,000, according to an analysis by international law firm Latham & Watkins.

“The new law applies to non-competition covenants, which are broadly defined as any written or oral covenant, agreement or contract that prohibits or restrains an employee of independent contractor from engaging in a lawful profession, trade or business of any kind,” Latham & Watkins wrote in its analysis.

“It’s probably going to be a tough thing for some employers to work through,” said Bryce McPartland, a Moses Lake attorney who specializes in employment law.

While he doesn’t know how widespread they are among employers in Grant County, McPartland said he’s seen non-compete clauses used extensively with sales people and in technology companies, though he added that he once litigated a non-compete agreement with a dance studio.

“I see them in all sorts of industries,” he added.

The new law, which was passed by the state legislature last May, also limits the duration of any non-competition clause in employment contracts to 18 months and requires employers to disclose any non-competition clauses up front, at the time of hiring.

McPartland said “it has always been true” that employment agreements have included non-compete clauses that are “reasonable in terms of time and space,” and noted that in one case he litigated a restriction preventing a former employee from seeking work “in the Columbia Basin.”

According to the text of the new law, the measure is designed to encourage “workforce mobility” and limit the ability of employers to restrict employees from seeking work with competitors. The new law also applies retroactively to all non-compete agreements existing before Jan. 1, 2020.

“With sweeping changes to existing state law, the Non-Compete Act will have a significant impact on companies operating in Washington,” said an analysis of the new law by the National Law Review published on Thursday.

The new law also blocks employers from preventing employees from moonlighting — taking a second job — if the employee earns “less than twice the applicable state minimum hourly wage,” or $27 per hour.

The inability to prevent people from moonlighting is probably going to be tough for some small businesses, McPartland added.

The new law specifically excludes confidentiality agreements, trade secrets, and franchise agreements, Latham & Watkins noted.

Washington is just the latest in a number of states – including New Hampshire, Maryland, Oregon and Rhode Island – that have limited the use of non-compete clauses in employment contracts.

Charles H. Featherstone can be reached at [email protected].