Covenants of noncompetition: Today
Generally, courts in the State of Washington will enforce covenants of noncompetition if the covenant is reasonable.
Whether a covenant is reasonable involves a consideration of three factors: (1) whether restraint is necessary for the protection of the business or goodwill of an employer, (2) whether it imposes upon the employee any greater restraint than is reasonably necessary to secure the employer’s business or goodwill, and (3) whether the degree of injury to the public is such that the loss of the service and skill of the employee warrants nonenforcement of the covenant.
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 to support the covenant is inherent in employment itself. On the other hand, if the covenant not to compete is entered into after employment commences, there must be independent consideration.
Public policy requires that a court carefully examine covenants not to compete, even when protection of a legitimate business interest is demonstrated, because of equally competing concerns of freedom of employment and free access of the public to professional services.
Covenants of noncompetition: January 1, 2020
Beginning January 1, 2020 there will be a new standard for covenants of noncompetition between employers and employees, which prohibit employees from seeking employment with competing companies. The new standard was passed by the State Legislature in the 2019 Session.
The new law makes these employment agreements unenforceable unless they meet a newly defined set of criteria, including that the employee earns more than $100,000 per year (adjusted for inflation) and that the noncompete period does not exceed 18 months.
If the agreement is a condition of employment, the terms of the agreement must be disclosed to prospective employees beforehand. It also requires that laid-off employees continue to be paid during the enforcement period.
The new law also prohibits noncompete agreements for contractors unless the contractor is paid more than $250,000, and allows courts to assess damages or a $5,000 penalty, whichever is greater, plus attorney fees.
Contacting Althauser Rayan Abbarno
Many contracts are complex and confusing for both sides of the agreement. Understanding your rights and responsibilities is very important. For a consultation with an Althauser Rayan Abbarno attorney in Centralia or Olympia call (360) 736-1301 or visit Centralialaw.com