Employee Non-Compete Agreement and Enforceability Memo — Washington

WASHINGTON Employee Non-Compete Agreement and Enforceability Memo

Quick-Reference Summary

Part A — Enforceability Memo

MEMORANDUM

TO: [CLIENT NAME]
FROM: [ATTORNEY NAME], [EMPLOYMENT GROUP]
DATE: [__/__/____]
RE: Enforceability of Proposed Non-Compete Covenant — [EMPLOYEE NAME] — Washington Law

I. Question Presented

Whether the proposed non-compete covenant between [EMPLOYER] and [EMPLOYEE], restricting [EMPLOYEE]'s post-termination ability to engage in [COMPETITIVE ACTIVITY] within [GEOGRAPHIC AREA] for [DURATION], is enforceable under chapter 49.62 RCW and Engrossed Substitute HB 1155.

II. Short Answer

[☐ Likely enforceable under current Ch. 49.62 RCW; but BECOMES VOID June 30, 2027 under HB 1155] [☐ Unenforceable — fails income threshold / disclosure / consideration / garden-leave requirements] [☐ Time-limited: enforceable only until June 30, 2027]. Washington's regime is uniquely strict, and any new non-compete will be voided by HB 1155 in less than [____] months. Recommend migrating protections into nonsolicit, NDA, and trade-secret covenants now.

III. Two-Regime Analysis

A. Current Law (Chapter 49.62 RCW) — through June 29, 2027

The covenant is void and unenforceable unless ALL of the following are met:

1. Income threshold. Employee's earnings exceed [$123,394.17 (2025) / $126,858.83 (2026) / verify current L&I notice] annually. Employee's documented earnings: $[__________]. [☐ Threshold met] [☐ Not met → VOID].

2. Pre-offer written disclosure. The terms of the covenant were disclosed to the Employee in writing no later than the time of initial oral or written acceptance of the offer of employment. Date offer disclosed: [__/__/____]. Date offer accepted: [__/__/____]. [☐ Compliant] [☐ Non-compliant → VOID].

3. Independent consideration (if covenant entered into after commencement of employment). Consideration provided: [☐ Signing payment $[___]] [☐ Raise of $[___]] [☐ Promotion to [____]] [☐ Equity grant of [___] units] [☐ Bonus of $[___]]. Continued at-will employment is NOT sufficient. [☐ Compliant] [☐ Non-compliant → VOID].

4. Layoff garden leave. If the Employee is laid off, the covenant is enforceable ONLY if the Company pays compensation equivalent to base salary at termination for the enforcement period, minus subsequent earnings. Will the Company commit to this in writing? [☐ Yes — language included] [☐ No — covenant unenforceable post-layoff].

5. Duration ≤ 18 months. Proposed duration: [___] months. [☐ ≤18 — presumed reasonable] [☐ >18 — must rebut by clear and convincing evidence].

6. Future-enforceability disclosure. If covenant only becomes enforceable when Employee's pay crosses the threshold, that fact MUST be disclosed.

7. Moonlighting. If Employee earns ≤ 2x state minimum wage, covenant cannot bar outside work.

8. Choice-of-law / forum. Any clause purporting to apply non-Washington law or non-Washington forum that would deprive the Employee of Ch. 49.62 protections is VOID.

B. HB 1155 — Effective June 30, 2027 (RETROACTIVE)

As of June 30, 2027, ALL noncompetition covenants with Washington employees and independent contractors are VOID, regardless of when executed. The expanded definition captures:

• Customer-nonservicing provisions (any agreement prohibiting acceptance/transaction of business with a customer);
• Forfeiture-for-competition provisions (any agreement requiring return/repayment/forfeiture of benefits or compensation because of engaging in a lawful profession, trade, or business — implicates certain bonus clawbacks and stay-or-pay arrangements);
• Performer agreements restricting lawful performance.

Mandatory notice. By October 1, 2027, the Company MUST provide written notice to all current AND former employees and independent contractors with active or still-applicable non-compete covenants, informing them that such provisions are void.

Preserved under HB 1155: Narrowly drawn nonsolicit covenants (≤18 months; covering current employees, current AND prospective customers/patients/clients with whom the worker established or substantially developed a direct relationship); confidentiality and trade-secret covenants; sale-of-business non-competes (1%+ ownership); franchise covenants.

IV. Remedies for Employer Violation

Under RCW 49.62.080, an aggrieved worker may recover actual damages OR $5,000 statutory penalty per violation, whichever is greater, plus reasonable attorney fees, expenses, and costs. Even merely "representing" that a worker is subject to a covered covenant after June 30, 2027 may expose the employer.

V. Recommendations

1. [☐ Verify Employee's annual earnings exceed the current L&I-published threshold]
2. [☐ Deliver pre-offer disclosure in writing AT OR BEFORE offer acceptance]
3. [☐ Document independent consideration for any mid-employment covenant]
4. [☐ Include layoff garden-leave commitment in writing]
5. [☐ Cap duration at 18 months]
6. [☐ Migrate primary protections to: (i) nonsolicit ≤18 months, (ii) NDA, (iii) trade-secret covenant, (iv) sale-of-business non-compete where applicable — all preserved under HB 1155]
7. [☐ Calendar October 1, 2027 mandatory notice obligation]
8. [☐ Audit existing covenants now and prepare worker notice template]
9. [☐ Avoid customer-nonservicing language and broad forfeiture-for-competition clauses going forward]

VI. Conclusion

[CONCISE FINAL ASSESSMENT — 2–4 sentences emphasizing the June 30, 2027 sunset and migration strategy.]

Part B — Non-Compete Agreement

EMPLOYEE NON-COMPETITION, NON-SOLICITATION, AND CONFIDENTIALITY AGREEMENT

This Employee Non-Competition, Non-Solicitation, and Confidentiality Agreement (the "Agreement") is entered into as of [__/__/____] (the "Effective Date") between [EMPLOYER LEGAL NAME], a [STATE] [ENTITY TYPE] with its principal place of business at [ADDRESS] ("Company"), and [EMPLOYEE FULL LEGAL NAME], residing at [ADDRESS] ("Employee").

1. Pre-Offer Disclosure Acknowledgment

The Employee acknowledges that the Company disclosed the terms of this Agreement in writing on [__/__/____], which was on or before the time of the Employee's initial acceptance of the offer of employment dated [__/__/____]. The Employee had a reasonable opportunity to review and consult counsel.

2. Earnings Representation

The Company represents that the Employee's annualized earnings, calculated as required by RCW 49.62.010(1) (W-2 Box 1 for employees), exceed the current threshold under RCW 49.62.020(1)(b), as adjusted by the Department of Labor & Industries under RCW 49.62.040. Current threshold (as of Effective Date): $[__________]. Employee's annualized earnings: $[__________].

3. Consideration

[Select one and complete.]

[☐ This Agreement is entered into contemporaneously with the Employee's initial hire. The offer of employment is sufficient consideration.]

[☐ This Agreement is entered into after the Employee's commencement of employment. The Company provides the following independent consideration: [☐ signing payment of $[___] paid within [___] days] [☐ promotion to [____] with salary increase of $[___]] [☐ equity grant of [___] units] [☐ bonus of $[___]] [☐ other: ____________].]

4. Definitions

"Competitive Business" means [DESCRIBE WITH SPECIFICITY].

"Confidential Information" means non-public Company information regarding [customers, pricing, methods, financials, technology], excluding information that is publicly known, lawfully obtained from a third party, or already known to the Employee before disclosure.

"Restricted Period" means the period of Employee's employment plus [______] months (NOT TO EXCEED 18) following termination of employment for any reason.

"Restricted Territory" means [DEFINE — match to actual employee activity and customer contact].

5. Non-Competition

During the Restricted Period and within the Restricted Territory, the Employee shall not engage in a role substantially similar to the role(s) performed for the Company for any Competitive Business.

6. Layoff Garden Leave

If the Employee's employment terminates as the result of a layoff (as defined under RCW 49.62.020(1)(c)), the Company may enforce Section 5 ONLY by paying the Employee compensation equivalent to the Employee's base salary at the time of termination for the Restricted Period, less compensation earned through subsequent employment during the Restricted Period. The Company must notify the Employee of its election to enforce within [___] days of termination.

7. Non-Solicitation (Customers and Employees)

During the Restricted Period and for not more than 18 months following termination, the Employee shall not solicit (a) any current or prospective customer of the Company with whom the Employee established or substantially developed a direct relationship through the Employee's work; or (b) any current employee of the Company to leave the Company.

8. Confidentiality / Trade Secrets

The Employee shall not use or disclose Confidential Information except in the proper performance of duties or as required by law. Nothing in this Agreement prohibits the Employee from reporting possible violations of law to a government agency.

9. Moonlighting

If the Employee earns at or below twice the Washington state minimum wage, nothing in this Agreement prohibits the Employee from additional employment outside the Company, consistent with RCW 49.62.060.

10. Future Enforceability Disclosure

If this Agreement becomes enforceable only at a later date due to changes in the Employee's compensation, the Company specifically discloses to the Employee that this Agreement may be enforceable against the Employee in the future, consistent with RCW 49.62.020(1)(a)(i).

11. Governing Law and Forum

This Agreement is governed by the laws of the State of Washington. Exclusive forum: Superior Court for King County, Washington, or the Superior Court of the county where the Employee resides. The Parties acknowledge that any provision purporting to apply non-Washington law or forum is VOID under RCW 49.62.050 to the extent it would deprive the Employee of any protection of chapter 49.62 RCW.

12. HB 1155 Acknowledgment

The Parties acknowledge that Engrossed Substitute HB 1155 voids all noncompetition covenants as of June 30, 2027. The Company will provide the written notice required by HB 1155 to the Employee by October 1, 2027.

13. Severability; Reformation; Entire Agreement

If any provision is unenforceable, it shall be severed and the remaining provisions remain in effect. Washington courts may, in their discretion, narrow overbroad provisions (RCW 49.62.020(2)), though the Parties have drafted with the strict statutory requirements in mind.

14. Signatures

Part C — Pre-Signing Checklist

☐ Confirmed Employee's annualized earnings exceed the current L&I-published threshold (2025: $123,394.17 / 2026: $126,858.83 — verify current year)
☐ Delivered written disclosure of covenant terms to prospective Employee NO LATER than initial acceptance of offer
☐ Documented date of disclosure and date of acceptance for audit trail
☐ If covenant signed post-hire, documented independent consideration (signing payment, raise, promotion, equity, bonus)
☐ Drafted duration to be ≤ 18 months
☐ Included layoff garden-leave commitment in writing
☐ Limited geographic scope to actual employee activity / customer contact
☐ Defined "Competitive Business" with specificity
☐ Confirmed Employee earns more than 2x state minimum wage (else moonlighting prohibition is void)
☐ Specified Washington governing law and Washington forum
☐ Included HB 1155 acknowledgment and October 1, 2027 notice commitment
☐ Calendared HB 1155 deadlines: June 30, 2027 (statute effective); October 1, 2027 (notice deadline)
☐ Prepared HB 1155 notice template for current AND former workers
☐ Paired covenant with nonsolicit (≤18 months), NDA, trade-secret covenant — all preserved under HB 1155
☐ Avoided customer-nonservicing provisions and broad forfeiture-for-competition clauses
☐ Retained executed original; provided executed copy to Employee
☐ Calendared termination-event re-review (re-assess enforceability before sending cease-and-desist or filing suit)

Sources and References

• Chapter 49.62 RCW (Restrictions on Noncompetition Covenants) — https://app.leg.wa.gov/RCW/default.aspx?cite=49.62
• RCW 49.62.020 (Void and unenforceable / employee threshold) — https://app.leg.wa.gov/RCW/default.aspx?cite=49.62.020
• RCW 49.62.030 (Independent contractors) — https://app.leg.wa.gov/RCW/default.aspx?cite=49.62.030
• RCW 49.62.040 (Annual threshold adjustment) — https://app.leg.wa.gov/RCW/default.aspx?cite=49.62.040
• RCW 49.62.050 (Choice-of-law/forum) — https://app.leg.wa.gov/RCW/default.aspx?cite=49.62.050
• RCW 49.62.060 (Moonlighting) — https://app.leg.wa.gov/RCW/default.aspx?cite=49.62.060
• RCW 49.62.080 (Remedies) — https://app.leg.wa.gov/RCW/default.aspx?cite=49.62.080
• Washington Department of Labor & Industries — Non-Compete Agreements — https://www.lni.wa.gov/workers-rights/workplace-policies/non-compete-agreements
• Engrossed Substitute HB 1155 (2026 session, signed March 23, 2026) — http://lawfilesext.leg.wa.gov/biennium/2025-26/Pdf/Bills/Session%20Laws/House/1155-S.SL.pdf
• Disclaimer: This template does not constitute legal advice. Consult licensed Washington counsel.