WA State Non-compete clause enforceability

PBinWA · Oct 5, 2011

Does anyone know how Washington state treats employment do not compete clauses?

Specifically, dealing with a professional position that has a regional do not compete clause stating the person can't work in a specific geographic area for 18 months after voluntarily leaving their position.

Just curious if anyone has dealt with this before.

Mark W. · Oct 5, 2011

Would this not be a civil matter? If so I don't know if you can guess how a court will rule.

PBinWA · Oct 5, 2011

I'm not sure but I guess it is a civil issue. I know some states (or the state's courts) essentially over rule these clauses (I think Oregon is one and apparently so does California) but I'm not sure if Washington was one.

NuthinFancy · Oct 5, 2011

The industry I work in has a lot of sales reps that sign non-disclosure, non-solicitation and non-compete agreements. As I understand it (IANAL), a non-compete is only valid if the employer offers an additional incentive to the employee to sign a non-compete agreement (they can't just make it a condition of employment, they have to give up some extra consideration), and the penalty to the employee for violating the non-compete agreement is limited to paying back the incentive.

Non-disclosure and non-solicitation agreements are different kettles of fish, since they usually involve proprietary info or intellectual property.

PBinWA · Oct 5, 2011

Thanks NuthinFancy.

That's an interesting angle. In this case it is my wife who is a lawyer/doctor/accountant type person and is not entirely happy with the practice she is in but doesn't want to have to move to keep working. I suspect there is concern that her clients will follow her but I'm not sure if there is an additional incentive that was paid.

mjbskwim · Oct 6, 2011

It can only be as good as the language in the contract.As long as all the "eyes" are dotted and "tee's" crossed.
She may be able to be a consultant? or some other term instead of what her actual license states?
My dad's company and the 3 owners all had non compete clauses in their contracts. He could have been an employee but not the actual owner of a different business in the same industry.

mat33 · Oct 9, 2011

I'm in agreement with NuthinFancy here. On the West Coast, non-competes are difficult to enforce. Courts will have a bias for making sure the worker is working vs protecting the employer. I have seen non-competes enforced here in Oregon for people moving between Nike and Adidas, but the former employer had to continue paying salary during the non-compete period. So basically you would turn in your two weeks notice, boss says "we're going to enforce the non-compete so sit on your butt and for six months. You only need to get up every two weeks to deposit your paycheck" then the other company hires you at the end of the waiting period. The purpose of the non-compete was to protect trade secrets for products not yet on the market. IANAL, but my understanding is that WA laws are similar here in that any firm wanting to enforce a non-compete will need to pay you during the non-compete AND have a very good reason to need the protection. If there was an upfront incentive tied to the agreement, the worst that would happen is that she would have to pay back some or all of that bonus. Give 'em the finger and be thankful for once that you live in a blue state.

PBinWA · Oct 10, 2011

Thanks Mat! We will review the contract and see what it exactly states.

PB

mat33 · Oct 10, 2011

To be clear, PB, even if she signed a contract that clearly stated she couldn't work for 18 months, it is likely not enforceable either because it violates state law or because the court will view it as predatory and not in the interest of keeping citizens employed. The timeline alone is excessive - courts will ask 'how will she feed her family?' Additionally, if she breaches her contract, her employer will have to demonstrate the damages they received as a result of her violating the agreement. Since the purpose of the agreement is a noncompete (vs retention) the damage would have to be lost profit due to her taking clients or disclosing confidential information to a direct competitor.

mjbskwim · Oct 10, 2011

mat33 said:
To be clear, PB, even if she signed a contract that clearly stated she couldn't work for 18 months, it is likely not enforceable either because it violates state law or because the court will view it as predatory and not in the interest of keeping citizens employed. The timeline alone is excessive - courts will ask 'how will she feed her family?' Additionally, if she breaches her contract, her employer will have to demonstrate the damages they received as a result of her violating the agreement. Since the purpose of the agreement is a noncompete (vs retention) the damage would have to be lost profit due to her taking clients or disclosing confidential information to a direct competitor.

Yeah all that will be easy to prove.Or do they have a spy in the other company,telling them what she is disclosing?

Hope all goes well with this

BBDartCA · Oct 12, 2011

I've dealt with this one both sides of the issue in Washington and several states. Below link gives a pretty good summary of the situation.

There are lots of practical issues involved. If you are taking trade secret design info from your old company to the new company, you are dead if it can be proved. But if you simply take a job at a competitor, and your former employer tries to enforce a non-compete no matter what you are doing at the new job, then Washington State courts can deem this an unrealistic restriction on your right to earn a living.

One thing to be clear about if looking at a job with a competitor, is to see if in your employment agreement documents, the hiring company will protect you if an injunction is filed by your former company. Many times they will not, which means they have a right to fire you with no harm if they have an injunction filed against. I've also seen the opposite where they will pay you to sit and do nothing and cover your personal liability if an injunction is filed - but this is for executive level positions.

Employment Law Blog: Are NonCompete Agreements Valid?

PBinWA · Oct 12, 2011

Too be honest we aren't aggressively pursuing it at the moment. I want her to consider her options but she thinks she is handcuffed. All this is good ammo for me to persuade her to look out for herself more.

There isn't really any trade secrets involved - just clients that might follow her.

Gunner3456 · Oct 12, 2011

I know nothing about the topic other than your attorney's fees could easily be more than she could earn. If a company really wants to get you, they can make a mell of a hess out of a court case. In addition to suing, they can play games like seeking an injunction to stop her from working until the case is resolved. Even if they lose that, you have to fight it. The list goes on.

It sounds to me like it would be a good investment to talk to an attorney.

Senator · Oct 12, 2011

My wife got caught up in that many years ago in Redmond, WA. Her Non-Compete clause stated that for $10,000 she could buy out of it. Despite my better judgement, I went along with her idea to fight it. $30K later...we lost. Read it carefully and, no matter how expensive it seems to buy out, it'll probably be worth it if departure is your preference.

Burt Gummer · Oct 12, 2011

I believe they are stronger if the non-compete is for a company's current accounts and for a term. Usually two years max.

In my line of work a lot of ex employees over the years have tried to leave and then solicit my accounts.

They fall on their face and make asses of themselves so a non-compete hasn't been a big priority for me. Another competitor out there is a non-issue for me, but a person that uses inside knowledge from working for me to try to take food off my table is dealt with in every legal manner available or a shovel whichever is more convenient at the time

.

Trlsmn · Oct 16, 2011

PBinWA said:
Too be honest we aren't aggressively pursuing it at the moment. I want her to consider her options but she thinks she is handcuffed. All this is good ammo for me to persuade her to look out for herself more.

There isn't really any trade secrets involved - just clients that might follow her.

I was going to say it wouldn't be a problem if customers aren't taken to the new employer, since customer's would follow I would expect a problem.

Gunner3456 · Oct 16, 2011

I'm not saying anyone is wrong, and I don't know a thing about this. However, I don't like it. How's a person supposed to work?

I've known for a long time that this is common when someone sells a business. The new owner doesn't want the seller going down the street and opening back up, pulling his old customers with him. That seems fair.

I wouldn't take a job with that agreement unless the employer agreed to pay my wages while I sat on my butt until the term expired.

$.02