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Washington's Updated Non-compete Laws

In 2019, Washington passed a law restricting the use of post-employment non-competition covenants for certain employees. While this law initially excluded non-solicitation covenants, it left the definition somewhat vague.

Effective June 6, 2024, new legislative changes will expand these statutory requirements to more restrictive covenants. Under RCW 49.62, to enforce a non-competition covenant, an employee's annual taxable earnings must meet a set threshold, which for 2024 is $120,559.99. This threshold adjusts yearly for inflation.

Furthermore, the terms of the non-competition covenant must be communicated in writing to the prospective employee no later than when the job offer is accepted. If provided later, additional consideration is required. Senate Bill (SB) 5935 broadens the scope, classifying more restrictive covenants as non-competition covenants, which now must adhere to statutory requirements to be enforceable.

Significantly, the law mandates that any ambiguities in restrictive covenants will be construed in favor of employees and their mobility. Traditional non-solicitation covenants will also need to meet the new statute's requirements if they extend beyond current customers to include prospective or former clients.

Importantly, non-competition covenants linked to the sale or purchase of a business are excluded from these requirements, provided the interest being sold is at least 1 percent of the business. Additionally, the statute now explicitly requires Washington law to apply to any non-competition covenant involving Washington-based employees.

Under the revised law, even those not party to the non-competition agreement, such as a new employer, can challenge the covenant and seek damages or modifications if aggrieved by it.

Employers must review and update their restrictive covenants by June 6, 2024, to ensure compliance. Confidentiality agreements should also be revisited to protect proprietary information effectively. Finally, to avoid legal complications, employers should provide the terms of non-competition covenants at the earliest stages of the hiring process, ensuring clarity and adherence to the new law.


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