On May 8, 2019, Washington Governor Jay Inslee signed into law a bill that prohibits employers from entering into noncompetition covenants with employees whose W-2 earnings are less than $100,000, and with independent contractors paid less than $250,000 per year.
In addition to the above, employers should be aware of the following five provisions in the new law:
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The law creates a presumption that any covenant longer than 18 months is unreasonable and unenforceable as a matter of law. A party to the covenant may rebut the presumption by showing through clear and convincing evidence that a duration longer than 18 months is necessary to protect the party’s business or goodwill.
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A covenant will be unenforceable unless the employer discloses its terms to a prospective employee in writing.
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If a covenant is entered into after employment begins, the employer must provide consideration in addition to employment to support the covenant.
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If an employee subject to a noncompetition covenant is terminated in a layoff, the covenant is void unless the employer pays the terminated employee base salary for the remainder of the covenant’s terms, less compensation earned through subsequent employment.
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If a court determines a noncompetition covenant violates the new law, the party seeking enforcement must pay the aggrieved person the greater of the actual damages or $5,000, plus reasonable attorneys’ fees and costs.
The new law will take effect January 1, 2020. Employers with questions regarding Washington’s new law – or that wish to review or implement noncompetition covenants – would do well to consult with competent counsel.
© Polsinelli PC, Polsinelli LLP in California