On January 3, 2025, the Washington State Legislature introduced HB1155 (the “Bill”) that, if passed, would broaden the definition of a “noncompetition covenant” and prohibit all employer-employee noncompete agreements.
The Bill would also seek to clarify the definition of “non-solicitation agreement” under Washington law. On January 13, 2025, the Bill was referred to the House Labor & Workplace Standards Committee where it remains pending.
Washington’s statute restricting the use of noncompetition covenants took effect in 2020, and it was amended in important ways last year. The current Bill proposes yet more amendments.
If passed, the Bill would amend Revised Code of Washington (RCW) Sections 49.62.005 and 49.62.010 to expand upon the definition of “noncompetition covenant” and notes that the provisions protecting employees and independent contractors must be construed liberally. Under the Bill, a “noncompetition covenant” includes:
- Every written or oral covenant, agreement, or contract, that prohibits or restrains an employee or independent contractor from engaging in a lawful profession, trade, or business of any kind;
- A covenant, agreement, or contract between a performer and performance space, or any third-party scheduling the performer for a performance space . . . that prohibits or restrains the performer from engaging in a lawful performance;
- An agreement that directly or indirectly prohibits the acceptance or transaction of business with a customer; and
- Any provision in an agreement that threatens, demands, requires, or otherwise effectuates that an individual return, repay, or forfeit any right, benefit, or compensation, as a consequence of the individual engaging in a lawful profession, trade, or business of any kind.
While the Bill seeks to broadly define “noncompetition covenant,” Washington’s noncompete law expressly states that “noncompetition covenant” does not include (i) non-solicitation agreements (as discussed below), (ii) confidentiality agreements, (iii) covenants prohibiting the disclosure of trade secrets or inventions, (iv) covenants entered into by a person purchasing or selling the goodwill of a business . . . , and (v) a covenant entered into by a franchisee—defined under RCW 19.100.010. In addition, covenants concerning purchasing or selling the goodwill of a business, or acquiring or disposing of an ownership interest, are exempt from the definition of “noncompetition covenant” so long as the “person signing the covenant purchases, sells, acquires, or disposes of an ownership interest representing one percent or more of the business.”
If enacted, the Bill would render all noncompetition covenants void and unenforceable regardless of when the parties entered into the agreement. Additionally, employers with current or former employees or independent contractors subject to a noncompetition covenant would be required to inform them by October 1, 2025 that the covenant is no longer enforceable. The notice requirement would be similar to the California statutory requirement that employers notify employees that restrictive covenants for California employees are unenforceable.
The Bill defines “nonsolicitation agreement” as “an agreement between an employer and employee that prohibits solicitation by an employee, upon the termination of employment: (a) of any employee of the employer to leave the employer, or (b) of any current customer of the employer to cease or reduce the extent to which it is doing business with the employer.” A non-solicitation agreement, however, does not include “an agreement that directly or indirectly prohibits the acceptance or transaction of business with a customer.” Therefore, if an agreement attempts to generally prohibit business transactions between a former employee and an entity’s customer, such agreement would likely be barred as an impermissible “noncompetition covenant”.
Should an employer violate any provisions, the attorney general may pursue relief on behalf of any aggrieved person(s) and an aggrieved person may bring their own cause of action against the employer.
In addition to the Bill, the Washington State Legislature also introduced SB5023, which aims to ban noncompetes for domestic workers, defined as “hourly and salaried employees and includes any worker who: (i) works for one or more hiring entity; and (ii) is an individual who works in residences as a nanny, house cleaner, home care worker, cook, gardener, or household manager, or any domestic service . . . .” SB5023 was referred to the Senate Labor & Commerce Committee, where it remains pending.
The introduction of these Bills demonstrate that state legislatures continue to put restrictive covenant lawmaking at the forefront, particularly following the demise of the FTC Proposed Rule that sought to ban employer noncompetes on a nationwide basis. In addition to Washington State, we recently reported that New York introduced legislation aimed at placing restrictions on noncompetes and other restrictive covenants. We anticipate that states will continue to propose new restrictive covenant legislation as the year progresses.
We will continue to monitor the Bill and provide updates on this topic.
Gianna Dano, a Law Clerk in Epstein Becker & Green’s Newark Office (not admitted to practice), contributed to the preparation of this piece.
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