Washington Expands Statute Covering Noncompetition Covenants

Washington State Governor Jay Inslee has signed into law a bill amending (and expanding) an existing Washington statute governing the enforceability of noncompetition covenants. At a high level, the amendment: * Expands the statute's coverage by: ° Including within the definition of "noncompetition covenant" covenants restricting an employee's ability to accept or transact business with a customer. ° Limiting the statute's exemption of customer nonsolicitation covenants only to those nonsolicitation covenants restricting the solicitation of "current" customers. ° Limiting the statute's exemption for noncompetition covenants entered into upon the sale of a business only to those covenants entered into when the restricted individual purchases, sells, acquires, or disposes of an interest representing 1% or more of the business. * Allows individuals "aggrieved" by a noncompetition covenant to which they were not a party (such as, potentially, a restricted employee's new employer) to assert a private right of action under the statute. * Provides employees who signed a noncompetition covenant prior to the statute's effective date a private right of action if an employer attempts to enforce the covenant or even "explicitly leverage[s]" the covenant. * Requires employers to provide new hires the terms of a noncompetition covenant in writing prior to an employee's written or verbal acceptance of an offer of employment. * Strengthens choice of law and forum selection restrictions, closing loopholes that allowed for the application of non-Washington law or the laying of non-Washington venue in litigation between employers and Washington-based employees in certain circumstances. OVERVIEW OF WASHINGTON'S EXISTING NON-COMPETE STATUTE As relevant to the amendments, Revised Code of Washington Chapter 49.62 currently provides that a noncompetition covenant is void and unenforceable unless: * An employee's compensation from the employer reflected on box one of the employee's W-2 from the year prior to termination of employment or enforcement (whichever is earlier) of a noncompetition covenant (Earnings) exceeds the statutory threshold. The amended statute, however, broadens the reach of its coverage in three ways: * The statute now explicitly covers "an agreement that directly or indirectly prohibits the acceptance or transaction of business with a customer." [...]while a covenant not to solicit customers is still exempted from coverage, a covenant that prohibits an individ