Noncompetition agreements

AN ACT Relating to encouraging competition and economic growth by 1
prohibiting noncompetition agreements and clarifying nonsolicitation 2
agreements; amending RCW 49.62.005, 49.62.010, 49.62.020, 49.62.080, 3
49.62.090, and 49.62.100; and repealing RCW 49.62.030, 49.62.040, and 4
49.44.190. 5
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:6
Sec. 1. RCW 49.62.005 and 2024 c 36 s 1 are each amended to read 7
as follows: 8
The legislature finds that: 9
(1) Workforce mobility is important to economic growth and 10
development; 11
(2) Agreements limiting competition or hiring restrain trade and 12
commerce and may be contracts of adhesion that may be unreasonable; 13
and 14
(3) The provisions in this chapter facilitating workforce 15
mobility and protecting employees and independent contractors ((need 16
to)) must be liberally construed and exceptions narrowly construed. 17
In addition, nonsolicitation agreements, which prohibit an employee 18
from actively soliciting current customers or employees away from the 19
employer, are not prohibited; however, the definition of 20
nonsolicitation agreement must be narrowly construed.21
S-0453.1
SENATE BILL 5437
State of Washington 69th Legislature 2025 Regular Session
By Senators Stanford, Dhingra, Saldaña, Valdez, Riccelli, Conway,
Frame, Hasegawa, Nobles, Ramos, and Shewmake
Read first time 01/22/25. Referred to Committee on Labor & Commerce.
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Sec. 2. RCW 49.62.010 and 2024 c 36 s 2 are each amended to read 1
as follows: 2
The definitions in this section apply throughout this chapter 3
unless the context clearly requires otherwise. 4
(1) (("Earnings" means the compensation reflected on box one of 5
the employee's United States internal revenue service form W-2 that 6
is paid to an employee over the prior year, or portion thereof for 7
which the employee was employed, annualized and calculated as of the 8
earlier of the date enforcement of the noncompetition covenant is 9
sought or the date of separation from employment. "Earnings" also 10
means payments reported on internal revenue service form 1099-MISC 11
for independent contractors.12
(2))) "Employee" and "employer" have the same meanings as in RCW 13
49.17.020. 14
(((3))) (2) "Franchisor" and "franchisee" have the same meanings 15
as in RCW 19.100.010. 16
(((4))) (3)(a) "Noncompetition covenant" includes every written 17
or oral covenant, agreement, or contract ((by which)) that prohibits 18
or restrains an employee or independent contractor ((is prohibited or 19
restrained)) from engaging in a lawful profession, trade, or business 20
of any kind. 21
(b) "A noncompetition covenant" also includes a covenant, 22
agreement, or contract between a performer and a performance space, 23
or a third party scheduling the performer for a performance space, 24
that prohibits or restrains the performer from engaging in a lawful 25
performance.26
(c) A "noncompetition covenant" also includes an agreement that 27
directly or indirectly prohibits the acceptance or transaction of 28
business with a customer. 29
(d) A "noncompetition covenant" also includes any provision in an 30
agreement that threatens, demands, requires, or otherwise effectuates 31
that an individual return, repay, or forfeit any right, benefit, or 32
compensation, as a consequence of the individual engaging in a lawful 33
profession, trade, or business of any kind.34
(e) A "noncompetition covenant" does not include: (((a))) (i) A 35
nonsolicitation agreement; (((b))) (ii) a confidentiality agreement; 36
(((c))) (iii) a covenant prohibiting use or disclosure of trade 37
secrets or inventions; (((d))) (iv) a covenant entered into by a 38
person purchasing or selling the goodwill of a business or otherwise 39
acquiring or disposing of an ownership interest, but only if the 40
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person signing the covenant purchases, sells, acquires, or disposes 1
of an ownership interest representing one percent or more of the 2
business; or (((e))) (v) a covenant entered into by a franchisee when 3
the franchise sale complies with RCW 19.100.020(1).4
(((5))) (4) "Nonsolicitation agreement" means an agreement 5
between an employer and employee that prohibits solicitation by an 6
employee, upon termination of employment: (a) Of any employee of the 7
employer to leave the employer; or (b) of any current customer of the 8
employer to cease or reduce the extent to which it is doing business 9
with the employer. An agreement that directly or indirectly prohibits 10
the acceptance or transaction of business with a customer is not a 11
"nonsolicitation agreement."12
(((6))) (5) "Party seeking enforcement" means the named plaintiff 13
or claimant in a proceeding to enforce a noncompetition covenant or 14
the defendant in an action for declaratory relief.15
Sec. 3. RCW 49.62.020 and 2024 c 36 s 3 are each amended to read 16
as follows: 17
(1) ((A)) Beginning on the effective date of this section, all 18
noncompetition covenants ((is)) are void and unenforceable((:19
(a)(i) Unless the employer discloses the terms of the covenant in 20
writing to the prospective employee no later than the time of the 21
initial oral or written acceptance of the offer of employment and, if 22
the agreement becomes enforceable only at a later date due to changes 23
in the employee's compensation, the employer specifically discloses 24
that the agreement may be enforceable against the employee in the 25
future; or26
(ii) If the covenant is entered into after the commencement of 27
employment, unless the employer provides independent consideration 28
for the covenant;29
(b) Unless the employee's earnings from the party seeking 30
enforcement, when annualized, exceed one hundred thousand dollars per 31
year. This dollar amount must be adjusted annually in accordance with 32
RCW 49.62.040;33
(c) If the employee is terminated as the result of a layoff, 34
unless enforcement of the noncompetition covenant includes 35
compensation equivalent to the employee's base salary at the time of 36
termination for the period of enforcement minus compensation earned 37
through subsequent employment during the period of enforcement.38
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(2) A court or arbitrator must presume that any noncompetition 1
covenant with a duration exceeding eighteen months after termination 2
of employment is unreasonable and unenforceable. A party seeking 3
enforcement may rebut the presumption by proving by clear and 4
convincing evidence that a duration longer than eighteen months is 5
necessary to protect the party's business or goodwill. )) regardless 6
of when the parties entered into the noncompetition covenant.7
(2) It is a violation of this chapter for an employer to enforce, 8
attempt to enforce, or threaten to enforce against an employee or 9
worker any agreement prohibited by this chapter, to represent that 10
the employee or worker is subject to an agreement prohibited by this 11
chapter, or to enter into or attempt to enter into an agreement with 12
an employee or worker that is prohibited by this chapter.13
(3) By October 1, 2025, an employer must provide to current 14
employees, former employees, and independent contractors, who were 15
required to enter into noncompetition covenants or whose contracts 16
include noncompetition covenants, a written notice that the 17
noncompetition covenant is void and unenforceable.18
Sec. 4. RCW 49.62.080 and 2024 c 36 s 5 are each amended to read 19
as follows: 20
(1) Upon a violation of this chapter, the attorney general, on 21
behalf of a person or persons, may pursue any and all relief. A 22
person aggrieved by a ((noncompetition covenant )) violation of this 23
chapter may bring a cause of action to pursue any and all relief 24
provided for in subsection((s)) (2) ((and (3))) of this section.25
(2) If a court or arbitrator determines that a ((noncompetition 26
covenant violates )) person has violated this chapter, the violator 27
must pay the aggrieved person the greater of his or her actual 28
damages or a statutory penalty of five thousand dollars, plus 29
reasonable attorneys' fees, expenses, and costs incurred in the 30
proceeding. 31
(((3) If a court or arbitrator reforms, rewrites, modifies, or 32
only partially enforces any noncompetition covenant, the party 33
seeking enforcement must pay the aggrieved person the greater of his 34
or her actual damages or a statutory penalty of five thousand 35
dollars, plus reasonable attorneys' fees, expenses, and costs 36
incurred in the proceeding.37
(4) A cause of action may not be brought regarding a 38
noncompetition covenant signed prior to January 1, 2020, if the 39
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noncompetition covenant is not being enforced or explicitly 1
leveraged.))2
Sec. 5. RCW 49.62.090 and 2024 c 36 s 6 are each amended to read 3
as follows: 4
(1)(((a))) Subject to (((b))) subsection (2) of this 5
((sub))section, this chapter displaces conflicting tort, 6
restitutionary, contract, including contract principles relating to 7
discharge by assent or alteration, and other laws of this state 8
pertaining to liability for competition by employees or independent 9
contractors with their employers or principals, as appropriate.10
(((b))) (2) This chapter does not amend or modify chapter 19.108 11
RCW. 12
(((2) Except as otherwise provided in this chapter, this chapter 13
does not revoke, modify, or impede the development of the common 14
law.))15
Sec. 6. RCW 49.62.100 and 2019 c 299 s 11 are each amended to 16
read as follows: 17
((This chapter applies to all proceedings commenced on or after 18
January 1, 2020, )) (1) RCW 49.62.010, 49.62.020, 49.62.080, and 19
49.62.090 apply to all proceedings commenced on or after the 20
effective date of this section, regardless of when the cause of 21
action arose. ((To this extent, this chapter applies retroactively, 22
but in all other respects it applies prospectively. )) A cause of 23
action may not be brought based on a violation of RCW 49.62.020 prior 24
to the effective date of this section.25
(2) Legal proceedings commenced before the effective date of this 26
section will be governed by this chapter as amended prior to the 27
effective date of this section.28
NEW SECTION. Sec. 7. The following acts or parts of acts are 29
each repealed:30
(1) RCW 49.62.030 (When void and unenforceable against 31
independent contractors) and 2019 c 299 s 4; 32
(2) RCW 49.62.040 (Dollar amounts adjusted) and 2019 c 299 s 5; 33
and 34
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(3) RCW 49.44.190 (Noncompetition agreements for broadcasting 1
industry employees — Restrictions— Trade secrets protected) and 2005 c 2
176 s 1. 3
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