Washington State Overhauls Its Noncompete Law

On May 8, 2019, HB 1450 (“An Act Relating to restraints, including noncompetition covenants, on persons engaging in lawful professions, trades, or businesses; adding a new chapter to Title 49 RCW; and providing an effective date”) was signed by Governor Inslee. The new law will be effective on January 1, 2020.

As explained in New trade secret and noncompete legislation: What’s already happened and what you can expect for the rest of the year in every state, the new law will, among other things,

  • Require certain advance notice of a noncompete
  • Require “independent consideration” for a noncompete entered post-commencement of employment
  • Place minimum earnings thresholds for the use of a noncompete ($100,000 for employees and $250,000 for independent contractors)
  • Prohibit the use of a noncompete against an employee who is laid off, unless the employer pays the employee’s base salary (less any compensation the employee earns elsewhere) during the restriction
  • Establish a presumption (rebuttable by clear and convincing evidence to the contrary) that a noncompetes with a duration longer than 18 months is unreasonable and unenforceable
  • Apply Washington law if the employee is “Washington-based.”

The law will apply not only to employees, but would impose restrictions on agreements applicable to independent contractors and franchisees as well. As to franchisees, the limitations are focused on only no-raid (i.e., nonsolicitation of employees) provisions.

The law will also make its violation an unfair business practice and subject the violator to actual or statutory ($5,000) damages, as well as attorneys’ fees, expenses, and costs.