Non-Compete Agreements in Washington State

Employers in Washington State need to ensure that their onboarding processes are in compliance with Washington State Non-Compete Laws. Generally, non-compete agreements are legal in Washington, but only under certain circumstances.

Here is everything you need to know about non-compete agreements in Washington State.

Non-Compete Agreements in Washington State

Under Washington State Non-Compete Law (RCW 49.62), a non-compete agreement, formally regarded as a noncompetition covenant, is a written or oral agreement restraining an employee or independent contractor “from engaging in a lawful profession, trade, or business of any kind”.

The definition of a non-compete agreement specifically does not include the following:

• Non-solicitation agreements
• Confidentiality agreements
• Agreements prohibiting the use or disclosure of trade secrets or inventions
• Agreements entered into by persons purchasing or selling an ownership interest or the goodwill of a business
• Agreements entered into by a franchisee when the franchise sale complies with RCW 19.100.020(1)

When Is a Non-Compete Clause Unenforceable in Washington State?

In the following circumstances, non-compete clauses are unenforceable in Washington State:

• The employer did not disclose the terms in writing "no later than the time of the initial oral or written acceptance of the offer of employment."
• The employer enters into the agreement with the employee after the commencement of employment but does not provide "independent consideration" for it.
• The worker is laid off (unless the employer pays the employee's base salary throughout the enforcement period, "minus compensation earned through subsequent employment")
• The worker makes under the annually-adjusted income threshold.

It’s also worth noting that non-compete agreements are typically no longer enforceable after 18 months of separation from employment. However, a court may decide that a longer duration is permissible if there is clear and convincing evidence that the longer duration is necessary to protect the employer's business or goodwill.

Employers should update their onboarding procedures and potentially have a secondary handbook for employees in which non-compete agreements are unenforceable. 

Washington State Non-Compete Income Threshold

The following table breaks down the non-compete income thresholds for both employees and independent contractors:

It’s important to note that compensation is annualized to determine whether or not a worker’s income is over the threshold. For example, if an employee doesn’t earn $123,394.17 over the course of a year because they only worked for 6 months, but would have made $124,000 had they worked the whole year, they are considered over the threshold.

Other Considerations Regarding Non-Compete Clauses in Washington State

There are a few other important things to consider when it comes to non-compete agreements in Washington State: 

Void and Unenforceable Provisions

It is important to note that the following provisions are considered to be void and unenforceable, meaning you can not include them in your non-compete agreement:

• A provision in a non-compete agreement that requires the worker to adjudicate a noncompetition covenant outside of this state.
• A provision that deprives the worker of the protections or benefits of Washington Non-Compete Laws.
• A provision that requires the application of choice of law principles or the substantive law of any jurisdiction other than Washington State.

Moonlighting and Second Jobs

Whether or not an employer can prohibit a worker from moonlighting, or working a second job, depends on how much the worker makes.

Generally, in order for an employer to prohibit moonlighting, the worker must make at least twice the current applicable Washington State Minimum Wage. However, there are some exceptions.

Get Help with Employee Onboarding and Compliance

Employees can bring forth a lawsuit in the event an employer violates the state’s non-compete laws, so it’s crucial that you maintain compliance.

Businesses that are struggling with compliance may want to consider reaching out to a Washington Payroll company for assistance.

To learn more about how PayNW is helping countless businesses in Washington with onboarding and compliance, contact us today.