It is exciting to sign an employment contract, especially when every job you have ever previously held has been on an at-will basis, where your employer was free to fire you at any time. You read and reread the parts about how much money you get, how many days of paid vacation you get per year, and the retirement account contributions that your employer will match, but you ignore the fine print of other provisions of your contract which, from a statistical perspective, are more likely to be the subject of employment disputes. For example, you might not notice until after you leave your job and sign an employment contract for another job that your old employment contract says something to the effect of, “You’ll never work in this town again.” Is it even legal for your previous employer to do that?
Can your employer really restrict your future job prospects? The short answer is that it depends. The courts of Washington State have the right to enforce non-competition provisions in employment contracts if those provisions are fair and do not violate the rights of employees and independent contractors. The Spokane non-compete lawyers at HKM Employment Attorneys LLP can help you decide whether to sign a non-compete agreement and can help you resolve disputes related to existing non-compete agreements.
Is Your Employment Subject to a Non-Compete Agreement?
Non-compete agreements can come in two forms. In some cases, they are stand-alone agreements that employees sign before or after they begin working at a new job. In other cases, they occur as provisions in an employment contract. In other words, employers cannot simply spring non-compete policies on you. The non-compete provisions cannot be lurking in a little-seen corner of the employee handbook, for example.
Non-compete clauses are not the same thing as non-disclosure agreements, although the two categories sometimes overlap. A non-compete clause restricts the employers for which an employee can work after leaving his or her job with the current employer. Likewise, some non-compete clauses prohibit former employees from setting up their own new businesses that fill a similar market niche to the employer’s business. By contrast, non-disclosure agreements prohibit current and former employees from sharing confidential information about their employers with third parties. In both cases, the intent is to protect the employer’s trade secrets and other information that enables the employer to remain competitive in the market.
Why Do Employers Ask Employees to Sign Non-Compete Agreements, and Why Do Employees Agree?
When one makes all reasonable inferences in favor of the employer, employers ask employees to sign non-compete agreements when, in the natural course of the work, the employee becomes familiar with information and techniques that give the employer a competitive edge over other businesses in the same industry in the same geographic area. A former employee in a high-ranking role would be in a position to use employer-specific information and business strategies to compete with the employer. Things that employers might want to protect by asking an employee to sign a non-compete agreement include client lists and plans for projects that are just in their beginning stages. In other words, employers use non-compete agreements to protect ideas that are not eligible for other specific legal protections under intellectual property laws, such as copyrights, patents, and trademarks. If you own a copyright, patent, or trademark, then you are already in a position where no one can use the protected idea without your permission, and if they try, you have the right to sue them.
As for why employees agree to the provisions of non-compete agreements, it is usually because they need the money they get from working from the employer. Signing the non-compete agreement means the difference between getting a job or remaining unemployed or the difference between keeping their job or getting fired.
Are Non-Compete Agreements Enforceable in Washington State?
If you think that non-compete agreements present a slippery slope by which employers can impose restrictions on employees’ activities outside of work, the law agrees with you. Washington state laws regarding non-competition agreements between employers and employees set rules about restrictions that employers can and cannot impose on employees pursuant to free-standing non-compete agreements and non-compete provisions of employment contracts. These are some Washington state laws regarding non-compete agreements:
- Non-compete agreements for employees are not valid unless, in 2023, the employee earned at least $116,593.18 by working for the employer.
- Non-compete agreements for independent contractors are not valid unless, in 2023, the independent contractor earned at least $291,482.95 by working for the employer.
- Employers may not prohibit an employee from holding additional employment outside of working for the employer unless the employee earns at least twice the state minimum wage.
- The dispute resolution provisions of non-compete agreements, including non-compete clauses within employment contracts, must state that the courts of Washington have the right to rule on disputes arising from the non-compete agreement. Employers cannot require employees to travel out of state to engage in legal actions arising from non-compete disputes, even if the employer is a company with its headquarters outside of Washington state.
In other words, non-compete agreements are only appropriate for highly paid employees in roles close to the decision-making centers of the organization. Meanwhile, many employees nationwide are subject to unfair non-compete agreements, including 20% of employees who do not have bachelor’s degrees. In 2021, President Biden issued an executive order encouraging the Federal Trade Commission to take action against employers who use non-compete agreements unfairly, and since then, the FTC has sought to restrict the use of non-compete agreements except where they are truly necessary.
Contact HKM Employment Attorneys, LLP About Non-Compete Agreements
The Spokane employment lawyers at HKM Employment Attorneys, LLP can help you if your employer wants you to sign an excessively non-restrictive non-compete agreement or is threatening to sue you over business activities in which you have engaged after the end of the employment relationship with your former employer. Contact the employment lawyers at HKM Employment Attorneys LLP in Spokane, Washington, to set up a consultation.