Washington State Amends Law on Noncompete Agreements

Washington state has amended its law concerning noncompetition covenants by emphasizing that the law’s provisions facilitating workforce mobility and protecting employees and independent contractors need to be liberally construed and exceptions narrowly construed.

Washington law currently has strict rules limiting when employers may require noncompetition covenants. The amended law clarifies that a “noncompetition covenant” includes, among other things, an agreement that directly or indirectly prohibits the acceptance or transaction of business with a customer. It further clarifies that a covenant entered into by a person purchasing or selling the goodwill of a business or otherwise acquiring or disposing of an ownership interest is not considered a “noncompetition covenant” only if the person signing the covenant purchases, sells, acquires, or disposes of an interest representing one percent or more of the business.

The amended law also provides that a provision in a noncompetition covenant signed by an employee or independent contractor who is Washington-based is void and unenforceable if it allows or requires the application of choice of law principles or the substantive law of any jurisdiction other than Washington state.

The effective date of the amended law is June 6, 2024.