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Many Existing Non-Compete Covenants Unenforceable Under New Washington Law


Effective Date: January 1, 2020


Christopher L. Thayer and Kim Sandher of Pivotal Law Group, PLLC WSCA Gold Level Corporate Partners


Non-compete covenants are designed to protect your company and are meant to protect businesses owners from former employees or independent contractors working for a competitor or opening a competing business.


The ability to enforce non-compete agreements will be substantially curtailed by the new law which went into effect on January 1, 2020. The new law limits the scope and enforceability of non-compete agreements and includes provisions relating to moonlighting restrictions, and franchise agreements.


Any action to enforce these


provisions, starting on or after January 1, 2020, will be subject to this new law, regardless of when the non-compete was entered into or when the cause of action arose. This means it applies to existing non-compete agreements, which may have been signed many years ago.


As


a business owner, you’ll want to check your non-compete covenants and see they comply with the new law.


What is a non-compete covenant?


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.


Income Threshold Determines Enforceability


Non-compete covenants will be unenforceable unless an employee’s earnings are greater than $100,000/year (on the date the employer seeks to enforce the covenant or the date employment ends, whichever occurs first) or an independent


12 www .chir ohealth.or g


contractor is paid more than $250,000/year for the prior year). These amounts will be adjusted annually for inflation.


For many small businesses, you will not be able to enforce non-compete agreements against employees or independent contractors, unless you pay them significantly more money.


Duration of Non-Compete Covenants Limited


The new law creates a presumption any non-compete covenant longer than 18 months is unreasonable and unenforceable. This presumption can only be overcome by “clear and convincing evidence” a longer duration is necessary to protect the employer’s business or good will.


The


“clear and convincing” standard is a very difficult standard to overcome.


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