On May 8, Washington’s Governor signed House Bill 1450 into law significantly limiting the enforceability of non-competition agreements in employment contracts.
Under the new law, a non-compete agreement will only be enforceable if the employee earns at least $100,000 per year, subject to inflation (or an independent contractor earning $250,000 per year). The duration of the restriction on competition cannot be longer than 18 months and must be disclosed in writing when the employee accepts the offer of employment. Alternatively, the restriction can be signed laterif the employee receives “independent” consideration for the agreement. The penalties for violating the law are significant; an employer could be subject to a $5,000 penalty per employee plus attorneys’ fees if the restrictive covenant is unenforceable.
The new law explicitly excludes a non-competition covenant entered into by a franchisee upon the sale of the franchise, as long as the franchise sale is registered under Washington’s Franchise Investment Protection Act, or is exempt from registration. However, it prohibits franchisors from preventing their franchisees from soliciting or hiring employees from one another or the franchisor.
The new law takes effect on January 1, 2020 and it prohibits forum selection.
Suketa Shah is an attorney in the Firm’s Labor and Employment & Business Litigation Practice Groups. If you have any questions or concerns about this issue or any other matter, please contact Suketa directly at 813-223-1099.