The enforceability of noncompetition agreements is a widely debated topic in and outside of the legal world. In just the last year, it has been a repeat topic on the floor of the Washington state legislature.
States across the county are seeing a trend toward the unenforceability of overly restrictive restraints on employees’ trade. Currently, however, only four states (Minnesota, California, Oklahoma, and North Dakota) have implemented complete bans on non-compete agreements. Washington is now considering the matter. If passed, House Bill 1155, which was introduced to the legislature in January of this year, may result in Washington becoming the fifth.
As recently as June 2024, the Washington legislature broadened the definition of “noncompetition covenant” and “non-compete agreement.” With the passing of House Bill 5935, a noncompetition agreement was defined as a written or oral covenant, agreement, or contract by which an employee or independent contractor is prohibited or restrained from engaging in a lawful profession, trade, or business of any kind. If HB 1155 passes, this definition will be expanded to include agreements between an employer and employee that directly or indirectly prohibit an employee’s acceptance or transaction of business with a customer. Under this addition, an employer cannot attempt to avoid the statute by only identifying specific customers within the scope of a noncompetition covenant as opposed to an industry or trade.
HB 1155 would further broaden what constitutes noncompetition and nonsolicitation covenants and would void all such provisions as unenforceable under Washington law.
If HB 1155 passes, the “noncompetition covenant” definition would cover contracts between “performers” and “a performance space, or a third party scheduling the performer.” The proposed definition and House Bill Summary do not define what professions are covered by the term “performers” or what spaces will constitute “performance space.” It would also add as prohibited restrictive language constituting a noncompetition covenant language that “threatens, demands, requires, or otherwise effectuates that an individual return, repay, or forfeit any right, benefit, or competition, as a consequence of the individual engaging in a lawful profession, trade, or business of any kind.”
HB 1155 would expand the definition of “noncompetition covenant,” in part, by prohibiting any provision in a noncompetition covenant signed by a Washington-based employee or independent contractor that:
- requires the employee or independent contractor to adjudicate a non-compete outside of Washington state,
- allows or requires the using the law of a jurisdiction besides Washington to adjudicate the non-compete,
- allows or requires a “choice of law” provision, or
- deprives the employee or independent contractor of the protections or benefits of the state laws restricting noncompete agreements.
Finally, if passed, employers would be required to provide all current and former employees and independent contractors subject to non-competes written notice stating that the agreement is now void and unenforceable.
Takeaways
If HB 1155 becomes law, Washington employers and employees alike should review their noncompetition agreements to ensure they comply with the new law.
