In Washington State, non-competition agreements are subject to earnings thresholds. For 2024, in order for non-compete agreement to be enforceable, the employee’s annual earnings must exceed $120,559.99. For independent contractors, their annual earnings must exceed $301,399.98 in order to be enforceable.
Additionally, all non-compete agreements that exceed 18 months are now presumptively invalid. The presumption can be rebutted if an by clear and convincing evidence that a duration longer than 18 months is necessary to protect the employer’s business or goodwill.
Further, if an employee is terminated as a result of a layoff, the employer must pay the employee his/her base salary for every month the employer binds the laid off employee to the non-compete.
Finally, employees and independent contractors cannot be required to resolve a noncompete outside of Washington state.
In 2023, there have also been a number of federal actions taken and/or proposed, which if implemented would impact non-compete provisions.
In January 2023, the Federal Trade Commission (“FTC”) proposed a rule that would make most employment non-compete agreements, as well as de facto non-competes, an unfair or deceptive trade practice under federal law. A recent update indicates the proposed ban will not be voted on until April 2024.
In February 2023, a bipartisan group of U.S. Senators reintroduced a bill (“Workforce Mobility Act of 2023”) that would largely ban the use of non-compete agreements nationwide, rendering them an unfair trade practice under federal law.
On May 30, 2023, the National Labor Relation’s Board General Counsel issued a memo setting forth the view that non-compete provisions in employment contracts and severance agreements violate the National Labor Relations Act, except when the provisions clearly restrict only individuals’ managerial or ownership interests in competing business or true independent-contractor relationships, or when narrowly tailored non-competes are justified by “special circumstances”. Special circumstances were not defined.
On July 9,2021, President Biden issued an executive order encouraging the Chair of the FTC and the Commission to exercise the FTC’s statutory rulemaking authority to address agreements that may unduly limit workers’ ability to change jobs. This would likely curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.
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