Non-compete agreements under pressure

Employers have traditionally used non-compete agreements to help protect against competing, former employees.  In Washington, non-compete agreements are generally enforceable, unless unreasonable in time or scope.

Non-compete agreements are under increased legislative attention.   California law currently voids most non-compete agreements.  In Washington, there currently 5 different proposed House and Senate Bills aimed at voiding or limiting non-compete agreements. 

House Bill 1577 would limit non-compete agreements to exempt employees (i.e. those not entitled to overtime compensation) or to any employee making less than $39,500 per year.  The Bill would also make a non-compete agreement void, if the employee were laid off or fired without cause.

House Bill 1926 proposes to void almost all non-compete agreements, except for persons selling a business or for partners or LLC members leaving a partnership or a limited liability company.

House Bill 2406 seeks to void non-compete agreements in the professions of hair design, drywall application, and fast-food establishments. 

House Bill 2931 would void non-compete agreements for temporary or seasonal employees, for persons terminated without just cause, and for all independent contractors.  The Bill also proposes to create a presumption that all non-compete agreements are void, if the agreements prohibit competition for more than 1 year after termination, or if the employee was a non-exempt employee.

Senate Bill 6625 seeks to void non-compete agreements signed by hourly wage earners, if the non-compete promise was for an unreasonably length of time.  The Bill presumes a non-compete promise unreasonable, if the promise is for a period of 6 months or more. 

Historically, non-compete agreements have been allowed, because the non-compete promise permits employers to hire, train, and otherwise invest in employees with less fear that the employee will later compete.  Non-competes are thought to encourage employers to hire and train employees.  While non-competes remain an effective tool, Washington employers might consider diversifying their efforts to protect their business.  Non-solicitation, non-disclosure, and confidentiality agreement are additional tools an employer could consider, as non-compete agreements come under increased legislative scrutiny.

Brian A. Walker helps businesses and individuals in employment, business, and real estate related litigation and transactions from the Wenatchee office of Ogden Murphy Wallace PLLC. You can reach Brian at bwalker@omwlaw.com or at (509) 663-1954.