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Pending Legislation - Regulating Non-Compete Agreements

    February 17, 2015

    Pending Legislation - Regulating Non-Compete Agreements

    Washington State employers have long used non-compete agreements to protect their business interests. Non-competes permit employers to invest in employees while minimizing the risk the employee may later use the training, information, and contacts gained against their employer.  

    The Washington State Legislature is now debating changes to Washington’s common law rules that could significantly alter the future use of non-compete agreements in this State.

    Presently, courts enforce non-compete agreements when the non-compete promise is reasonable. Non-compete agreements are reasonable when, (1) the non-compete promise is necessary for the protection of the business or goodwill of the employer, (2) the agreement imposes upon the employee no greater restraint than is reasonably necessary to protect the employer, and (3) the degree of injury to the public caused by the non-compete promise is such that the loss of the employee’s service and skill to the public is insufficient to prevent enforcement of the employee’s non-compete promise.

    Currently, a covenant not to compete must be supported by consideration.  If the covenant not to compete is entered into at the time that employment commences, the general rule in Washington is that consideration sufficient. On the other hand, if the covenant not to compete is entered into after employment commences, there must be independent consideration. Examples of independent consideration include increased wages, a promotion, or a bonus.

    Public policy requires that a court carefully examine non-compete agreements.   This is due to the competing concepts of protecting legitimate business interests and the freedom of employment and the free access of the public to professional services.  Thus, a covenant not to compete can be no greater in scope than is necessary to protect the business or goodwill of the employer.

    Pending House Bill 1577 would significantly alter Washington’s existing non-compete laws.  It would make unlawful non-compete agreements for low-income employees and would require courts to presume all non-compete agreements exceeding 6 months in duration to be unreasonable and unenforceable, unless the employer could rebut this presumption.  The Bill also would require an employer to prove “actual harm” caused by a competing former employee, before the employer could enforce an otherwise valid non-compete agreement.

    If passed, the new statute would apply to noncompetition agreements entered into on or after the effective date of the new law.  Thus, any non-compete agreements entered into prior to the law’s passage would continue to be analyzed under current Washington law.

    Bill 1577 is now pending in the Washington State House of Representatives, and has been referred to committee for analysis, and can be tracked on the Washington State Legislatures, website at

    Odds are that Bill 1577 will die in committee.  However, the proposed legislation is another example of how the law is moving toward more employee protections at the expense of employers.  Employers should still consider non-compete agreements executed at the time of hire valid.  But, extra caution should be used to document the need for the non-compete and to craft the scope and duration of the non-compete agreements.

    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 if you have questions or comments at or at (509) 663-1954.