Washington’s Legislature Considers Limiting Non-Competes

According to the most recently available Census data, among those who moved from another state to Washington in the prior year, many times more people came up from California than from anywhere else. The Washington Legislature is presently considering whether a certain California public policy should head up I-5 as well.

Multiple bills are pending in the Washington Legislature that would have the effect of limiting the enforceability of non-competition agreements. Although Washington public policy disfavors restraints on trade, courts may enforce non-competes deemed reasonable under a multi-factor test that, among other things, considers the time and geographic scope of the restraint, and weighs the harm to the employer, the burden on the employee, and the public interest.

In California, of course, non-competes are, with limited exceptions, generally void as against public policy under longstanding statutory and case law.

One of the Washington proposals, which has attracted sponsors from both sides of the aisle, would attempt a somewhat incremental approach to regulation of non-competition agreements. HB 2406 would initially declare that non-competes are void and cannot be enforced against people who work in a limited number of fields: barbers, cosmetologists, drywall applicators, estheticians, fast-food workers, hair designers, and musicians. Over time, subsequent legislatures could add additional industries and types of work to the ban.

Another bill, HB 2931, focuses on enforcement. That proposal would prohibit courts from reforming a non-competition agreement so that it would comport with Washington law and public policy; under this proposal, if the court found the contract unreasonable, the contract would be void. (It appears HB 2406 would permit reformation as a proposed amendment  would, in the event a court reforms a non-compete to make it enforceable, award attorneys’ fees to the party against whom the non-compete is enforced).

HB 2931 would also render void non-competition agreements against independent contractors, employees laid off or otherwise terminated without cause, and temporary or seasonal employees. (HB 2931 would have also established a rebuttable presumption that non-competes against non-executive employees or that last longer than a year are unreasonable, but a recent amendment filed by the bill’s sponsor would strike that language).

These bills follow on three bills (HB 1157, HB 1173, HB 1926) addressing the enforceability of non-competes in several different ways that had been introduced last year.

It is up to the Legislature to determine whether any of the proposals is right for Washington and its businesses, workers and consumers. Given the recent spate of legislative interest in the issue, though, it will be worthwhile keeping an eye out to see what, if anything, happens.

While it is not clear whether Washington will ultimately join California in significantly restricting the enforceability of non-competes—the Legislature’s regular session ends in a few weeks, but a bill could be reintroduced in a subsequent biennium—we will follow the discussion in the Evergreen State and keep you posted here on TSW.