The new law also applies to independent contractors. A non‑competition covenant is void and unenforceable against an independent contractor unless the contractor’s earnings (from the party seeking enforcement) exceed $250,000 per year.
Regardless, non‑competition restrictions may not exceed 18 months, unless there is proof by clear and convincing evidence that a longer time is necessary to protect the business or its goodwill.
It appears that broader restrictions from existing agreements will not be grandfathered in when the new law takes effect January 1, 2020. The new law will apply to all legal proceedings commenced on or after January 1, 2020.
If a court or arbitrator determines that an agreement violates the new law, it will be costly: the greater of actual damages or a statutory penalty of $5,000, plus reasonable attorney fees, expenses, and costs. It will also be costly if the court or arbitrator decides to reform, rewrite, modify, or partially enforce a covenant. The party seeking enforcement will be assessed the same damages and fees. On a more positive note, there is not a provision to allow a lawsuit or arbitration to challenge a pre-2020 covenant that is not being enforced.
In spite of the restrictions of the new law, businesses still have tools to protect themselves against departing employees who do not respect their proprietary information or relationships. The new law does this by a “carve out”: a “non‑competition covenant” does not include:
- a restriction on departing employees forbidding them from soliciting other employees to leave the employer;
- a restriction on departing employees forbidding them from soliciting customers to cease or reduce their business with the employer;
- a confidentiality agreement;
- a covenant prohibiting use or disclosure of trade secrets or inventions;
- a restrictive covenant entered into in connection with the purchase or sale of the goodwill of a business or in connection with the acquisition or disposal of an ownership interest;
- a covenant entered into by a franchisee, if the franchisee sale complies with RCW 19.100.020(1);
- enforcement of the common law duty of loyalty and laws preventing conflicts of interest and any corresponding policies.
For questions regarding restrictive covenants, confidentiality agreements, and trade secrets, call Richard Hunt at (503) 276-2149 or firstname.lastname@example.org.
Electronic Alerts are written by Barran Liebman attorneys for their clients and friends. Alerts are not intended as legal advice, but as employment law, labor law, and employee benefits announcements. If this has been forwarded to you, and you would like to begin receiving Electronic Alerts directly, please email or call Traci Ray at 503-276-2115. Copyright ©2020 by Barran Liebman LLP.
Las Alertas electrónicas son escritas por abogados de Barran Liebman para sus clientes y amigos. Las Alertas no son proveídas como asesoramiento legal, sino solo como anuncios de leyes de empleo, leyes laborales y beneficios de empleo. Si esto ha sido remetido a usted y quisieras empezar a recibir las Alertas directamente, por favor mándanos un correo electrónico o llama a Traci Ray al 503-276-2115. Derechos de autor ©2020 por Barran Liebman LLP.