What happened?

On March 13, 2024, Governor Jay Inslee signed Substitute Senate Bill (S.S.B.) 5935 which updated and clarified Washington law regarding restrictive covenants (RCW 49.62 et seq.).

What are the details?

The legislation provides that a “noncompetition covenant” also includes “…an agreement that directly or indirectly prohibits the acceptance or transaction of business with a customer.”

Key changes

• Expands Definition of “Noncompetition Covenant” and “Nonsolicitation Agreement”
• Clarifies the Timing of the Prior Notice Requirement
• Clarified Choice-of-Law Provision Requirements
• Expands Retroactive Application 
• Increased Number of Potential Plaintiffs

The objective of the amendment was to clarify some provisions that, according to the legislators, the courts have “misconstrued or misinterpreted,” with the added effect of making it more employee friendly.

Business Considerations

• Employers with Washington-based workers and independent contractors should be aware of the updates to the law regarding restrictive covenants and should consider reviewing and updating their provisions.
• Employers should exercise caution when enforcing agreements made before 2020.
• Employers should reassess existing agreements with their employees and independent contractors to ensure enforceability.
• Employers operating in Washington that have or are considering non-compete or non-servicing agreements with their employees or contractors, or are thinking about hiring individuals who have such agreements with other employers, should understand the implications of these changes.
• Employers should also revise any policies, practices, procedures, and communications used with departing employees to prevent any situation that could be seen as “explicitly leveraging” pre-2020 covenants that are now in violation of the statute.

Source References

• Washington State Updates and Clarifies Noncompetition and Nonsolicitation Law (Ogletree Deakins)
• Washington State Legislative Updates (Littler Mendelson P.C.)
• Washington State Is Making Worker-Friendly Amendments to Its Noncompete Statute (Epstein Becker & Green, P.C.)

Resources

• Official Bill Page: SB5935
• Bill: SB5935

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