Senate votes to restrict non-compete contracts

OLYMPIA (March 7, 2019) — The Washington State Senate on Tuesday approved legislation supported by the Washington State Labor Council, AFL-CIO that would create broad new restrictions on the use of “non-competition agreements” in the state. These contracts, often signed by workers as a condition of their hiring, block them from finding better jobs in their industry.

SB 5478, sponsored by Sen. Marko Liias (D-Lynnwood), would regulate non-competition covenants in Washington state to ensure they aren’t being used to exploit workers and deny them the opportunities to find better jobs. The bill was amended and then approved on a 30-18 vote.

As amended, SB 5478 would:

●  Set a wage threshold of $100,000 (adjusted for inflation), below which non-competition covenants would be void and unenforceable.

●  Bar non-competition covenants for laid-off employees unless that employee is compensated during its enforcement.

●  Limit the duration of non-competition covenants to 18 months.

●  Limits performer blackout dates to three days.

●  If an employer tries to enforce an overly broad non-compete and the court rewrites it, the ex-employee receives a statutory penalty plus his or her attorney fees.

Originally intended to protect a company’s “investment” in executives or highly paid managers who might unfairly take their knowledge to a rival company, non-competition covenants have proliferated in recent years and are now required of many middle-class and low-wage workers. A New York Times exposé found they were required in professions “from event planners to chefs to investment fund managers to yoga instructors.” Even fast-food employees.

The state of New York had to take the Jimmy John’s sandwich chain to court over its requirement that employees not take jobs for rival fast-food companies. New York’s attorney general said it was “unconscionable (to) limit mobility and opportunity for vulnerable workers and bully them into staying with the threat of being sued.”

In addition to the above-listed restrictions, SB 5478 would bar franchisors from restricting franchisees from soliciting or hiring other franchisees’ employees.