WASHINGTON SUPREME COURT STRENGTHENS RESTRICTIONS ON EMPLOYMENT AGREEMENTS

WASHINGTON SUPREME COURT STRENGTHENS RESTRICTIONS ON EMPLOYMENT AGREEMENTS

While the future of non-compete provisions remains uncertain at the federal level, several states have already implemented their own restrictions, with increasing support from the courts. Recently, the Washington Supreme Court ruled that non-compete agreements preventing certain employees from moonlighting—or supplementing their income with additional work—are unenforceable, possibly even if the supplemental work results in competition.

The court’s decision is rooted in a broad interpretation of a state law passed in 2019, which restricts the enforcement of non-compete agreements for independent contractors and employees in various circumstances, including applicable earnings thresholds that are adjusted annually for inflation. In 2025, non-compete agreements will be void and unenforceable in Washington for employees earning less than $123,394.17 and independent contractors earning less than $308,485.43. Violation of the law can result in penalties and damages, along with attorney fees.

This shift in state legislation has been a growing trend in recent years, with more states implementing or considering similar changes. Non-compete clauses in the employment context are currently banned in four states—California, Oklahoma, North Dakota, and Minnesota—while others have imposed restrictions that are based on salary thresholds or limited to specific industries, like technology or healthcare.

With scrutiny of non-competition provisions and agreements continuing to tighten, it is important for businesses to review their agreements (and update as necessary) to minimize potential risks. Additionally, if the business is expanding into a different state, it is important to review the employment laws of that state to ensure compliance. Note that enforcement of non-competition clauses tied to a sale of a business is still generally an exception to enforcement.

The attorneys at Dvorak Law Group are available to discuss, advise, and assist with any issues regarding non-compete clauses or other restrictive covenants under state laws.