Gov. Jay Inslee has signed a bill that reforms the state’s approach to noncompetition covenants and limits noncompete clauses in company contracts with independent contractors and employees.
The new law, Engrossed Substitute House Bill 1450, becomes effective on Jan. 1, 2020. The bill was sponsored in the House by Representative Derek Stanford and in the Senate by Senator Marko Liias.
The legislators were troubled by the increasing use of noncompetition covenants and the breadth of covenants signed by employees and independent contractors. Therefore, the new law outlaws various practices the legislature deemed to be unfair or unreasonable and applies to employers, employees, and independent contractors.
- If an employee earns less than $100,000 annually yet signs a noncompetition covenant, the covenant is unenforceable.
- If an independent contractor earns less than $250,000 annually, yet signs a noncompetition covenant, the covenant is unenforceable.
- Regardless of an individual’s earnings, noncompetition covenants longer than eighteen months are presumed unreasonable.
- If an employer tries to enforce an overly broad noncompete and the court rewrites it, the ex-employee receives a $5,000 statutory penalty plus his or her attorney fees.
- The ability of low wage workers to hold a second job is better protected and fast food and other franchise workers are protected from prohibitions on being hired by other franchisees.