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.


Liability for Damages and Attorney Fees, Even if Non-competition Covenant is Enforced


If a court or arbitrator rules a non-compete covenant violates the law, or the arbitrator or court is required to modify any aspect of the agreement to make it enforceable, the employer will have to pay the greater of $5,000 or actual damages, plus attorneys’ fees, expenses, and costs to the employee.


Laid Off Employees Require Ongoing Compensation


The new bill tries to address a situation where the employee is laid off and prohibited from working for any competitor for the next year and half because of what they learned. It requires that to enforce a non-compete against an employee who is terminated because of a layoff, the employer must pay the employee their base salary during the enforcement period, less any earnings the employee earns through subsequent employment during that period.


For example, imagine you hire someone for $50,000/year and you lay them off three months later. If you want to enforce a non-compete covenant against them saying they can’t work in your industry for the next year and half, you’ll need to continue paying them their salary (minus any earnings they have from another job not in the industry).


Limits on Forum Shopping and Choice of Law


Agreements with Washington-based employees and independent contractors are void if they require disputes to be adjudicated outside of Washington or if they deprive the person of the protections under the new law.


Disclosure and Consideration Obligations


The non-compete covenant has to be disclosed in writing to a prospective employee no later than the time they accept an offer of employment, even if the non-compete becomes enforceable only at a later date because of an increase in the employee’s pay in the future.


If the employee is asked to sign a covenant after already starting work and being paid, the employer will have to pay independent consideration, such as a raise or a bonus, for it to be enforceable.


Restrictions on Prohibiting Employees from Moonlighting


Starting January 1, 2020, the new law prohibits anti-moonlighting restrictions against employees who earn less than twice Washington’s minimum wage, with some limited exceptions. An employer cannot restrict or prohibit an employee who earns less than $27/hour in 2020 from having a second job, working as an independent contractor, or being self-employed. The minimum wage in Washington State will be $13.50 in 2020 and will be adjusted annually for inflation so this $27 pay level will change each year.


However, employers can still prohibit moonlighting where it would cause issues of safety for the employee, coworker, or the public, or it would interfere with the employer’s reasonable and normal scheduling expectations. An employer could also prohibit an employee from moonlighting at a job where it would present a conflict of interest because the employee still continues to have a duty of loyalty and there are laws preventing conflicts of interest.


Impact on You as a Business Owner


Many practices who have historically utilized non-compete covenants with their employees will be unable to enforce their existing agreements under the new law.


However, all hope is not lost for employers, and there are a few options and issues to keep in mind.


1. Keep in mind, non-competes of 18 months or less – are still allowed if the employee earns $100,000 or less per year.


2. You may still include non-solicitation clauses in a contract, prohibiting an employee from soliciting patients or other employees.


3. You may still include confidentiality provisions, protecting patient lists and proprietary business information.


As a business owner, you should review any existing agreements and policies to ensure they will comply with the new law.


Pivotal Law Group recommends all employers who utilize non-compete agreements in their business to contact us as soon as possible to review your forms and formulate a strategy for how to address the impacts of this law with existing employees and future employees. Please contact either managing member Chris Thayer at 206.805.1494/ CThayer@PivotalLawGroup.com, or senior associate Kim Sandher at 206.805.1490/ KSandher@PivotalLawGroup.com.


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