Drafting An Enforceable Washington Non-Compete Agreement

Many businesses invest significant time and effort into training their high level employees and, in so doing, grant them access to the inner workings of the company. As part of this training, employees may learn about confidential or proprietary techniques and strategies – or may have access to exclusive customer or distributor lists.

While some employees may choose to stay at the business for an extended period of time, others will inevitably move on to other opportunities. When they do so, they may take that confidential information or those customers with them, hurting the business that originally invested in them in the process.

In order to prevent this scenario from occurring, or minimize the risk of damage, many employers will attempt to bind employees to non-compete agreements. These agreements limit an employee’s ability to work in certain fields or geographical areas, or to use information obtained in their prior position.

The Legality of Non-Competes in Gig Harbor

While non-compete agreements are a general practice amongst many employers, there are limits to their legality. Employers cannot impose excessive restrictions on an employee’s job options after leaving a company, for risk of leaving the employee without a job at all, or forcing the employee to move.

For example, a construction company may want to prevent its executives from moving to a new company or starting their own business in the construction industry for the next 50 years, anywhere in the United States. This would clearly be excessive, as it makes it virtually impossible for that employee to find a new job.

If the court does find that a non-compete agreement is excessive, the court has the authority to limits its duration or geographic proximity.

Some states take a very conservative approach to non-compete agreements – allowing them in only very limited circumstances and preferencing the right of the worker to continue in his or her desired profession.

Washington law, by contrast, does generally hold that non-compete agreements are enforceable, but requires that they meet a three part test before they will be found valid and upheld.

• First, the existence of the non-compete must be reasonably necessary in order to protect the needs of the business or employer.
• Second, the limitations imposed by the non-compete cannot be greater than reasonably necessary to protect the employer.
• Third, the limitations cannot cause harm to the public by preventing the employee from using his skills or service in the field.

In conjunction with these three requirements, Washington courts have also held that non-compete agreements cannot be unreasonably broad in terms of any geographic limitations. Likewise, they cannot restrict an employee for an excessively long period of time.

Even after all of these requirements are met, Washington law does not guarantee that your non-compete agreement will be upheld. Evaluating a non-compete also requires consideration of the context and whether it was reasonable to expect the employee to agree to the non-compete.

Under Washington contract law, where an employee gives up a certain right or privilege – such as the right to work in an unrestricted fashion after leaving his or her original employer – that employer must give the employee something in return.

For example, where you provide extensive training to your employee, ongoing mentorship, or access to a carefully cultivated list of clients, a non-compete may well be upheld. But if you try to bind a low level employee (who is receiving minimal benefit from the job) to a non-compete, the court may hold that the non-compete cannot be upheld.

So How Do I Draft a Solid Non-Compete Agreement?

In light of Washington’s restrictions on non-compete agreements and the protections afforded to employees, what can an employer do to maximize the likelihood that its non-compete agreement will be upheld?

First, the employer should identify the benefits that its employee is getting access to as part of the employment relationship, and the importance of these benefits to the success of the company. Perhaps your CEO has developed a unique training program that only your employees participate in, or your sales executive is learning the trade secrets behind a product being sold.

These types of opportunities help to justify the use of non-competes – and allow employers to satisfy the first step in Washington’s three-part test. It is not enough for an employer to simply argue that it does not want its employees competing with it at a later date. You must be able to show the legitimate business interests you are trying to protect.

Second, consider what restrictions are reasonable in light of the industry you work in and the reach of your company. If you are a local business serving only Gig Harbor, it would be unreasonable to restrict your employees from working at any business in a similar industry anywhere in the Pacific Northwest.

Likewise, if you work in a quickly-changing tech environment, where strategies relied upon in your current environment may be outdated and irrelevant in five years, a non-compete for ten years would be an unreasonable request under the circumstances.

Not only must employers consider reasonableness in light of their own needs, but they must also consider reasonableness in light of the job market. If you work in a niche industry that only exists in Washington, it will be difficult to convince a court that your employee should not be allowed to work anywhere else in the state, as that would effectively put them out of a job.

Washington Lawyers Carefully Drafting or Reviewing Your Non-Compete

No employer wants to go to great lengths to draft a non-compete, convince an employee to sign it, offer particular incentives for signing, and then later learn that the non-compete isn’t actually valid. Preventing this scenario requires employers to carefully evaluate their non-compete agreements from the outset and take the time to have them reviewed by an independent set of eyes.

Washington attorneys familiar with the state’s particular non-compete requirements will be able to offer suggestions on how to tweak your agreement to better meet Washington’s requirements, and any particular pitfalls to watch out for in your industry.

At Blado Kiger Bolan, PS,  our employment attorneys can assist you in drafting an initial non-compete for your new business, or in reviewing and updating a non-compete that may already exist.  To talk with a knowledgeable lawyer about your options, contact us online or at (253) 470-2356.