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

[☐ Potentially enforceable under current chapter 49.62 RCW but void beginning June 30, 2027] [☐ Unenforceable — fails income threshold / disclosure / consideration / layoff-compensation requirements] [☐ Time-limited: enforceable only through June 29, 2027]. Any new noncompetition covenant will become void under 2026 Washington Laws chapter 149. Consider narrower nonsolicitation, confidentiality, and trade-secret protections.

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 $[___]] [☐ Other: ________]. RCW 49.62.020(1)(a)(ii) requires independent consideration but does not define a universal sufficient amount or form; Washington counsel must assess the completed facts. [☐ Counsel confirmed] [☐ Not confirmed → do not use].

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. Proposed duration: [___] months. [☐ ≤18 — does not trigger the statute's over-18-month presumption, but is not automatically reasonable] [☐ >18 — presumed unreasonable and unenforceable unless necessity to protect business or goodwill is proved 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 less than 2x state minimum wage, the employer cannot bar outside work except where the services raise statutory safety, scheduling, loyalty, or conflict issues under RCW 49.62.070.

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. 2026 Washington Laws Chapter 149 — Effective June 30, 2027

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.

Excluded from the future definition of noncompetition covenant: Narrowly drawn nonsolicit covenants (employee solicitation and qualifying current/prospective customer, patient, or client solicitation for no more than 18 months); confidentiality agreements; trade-secret or invention covenants; qualifying sale-of-business or ownership-interest covenants involving at least 1%; qualifying franchise covenants; and a limited written agreement to repay out-of-pocket educational expenses that satisfies all three conditions in future RCW 49.62.010(3)(e)(vi). A customer-nonacceptance or nonservicing clause is not a nonsolicitation agreement.

IV. Remedies for Employer Violation

Under RCW 49.62.080, an aggrieved worker may recover actual damages OR a $5,000 statutory penalty, whichever is greater, plus reasonable attorney fees, expenses, and costs. Beginning June 30, 2027, representing that a worker remains subject to a noncompetition covenant violates RCW 49.62.020.

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 a future-compliant nonsolicit, confidentiality agreement, trade-secret/invention covenant, or qualifying transaction/education agreement after separate review]
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 part of the Employee's initial offer, was disclosed by the statutory deadline, and its consideration has been reviewed by Washington counsel.]

[☐ 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 ending on the earlier of [______] months after termination (NOT TO EXCEED 18) or 11:59 p.m. Pacific time on June 29, 2027. The post-employment covenant does not apply during employment and cannot extend beyond the statutory sunset.

"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, 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, as required by RCW 49.62.020(1)(c). The Company must notify the Employee of its election to enforce within [___] days of termination.

7. Non-Solicitation (Versioned for the Statutory Change)

Through June 29, 2027: For no more than [____] months after termination, Employee shall not actively solicit (a) a current employee of the Company to leave the Company or (b) a current customer of the Company with whom Employee had material work contact to cease or reduce business with the Company. The clause does not prohibit accepting or transacting business.

Beginning June 30, 2027: For no more than 18 months after termination, Employee shall not actively solicit (a) a current employee of the Company to leave the Company or (b) a current or prospective customer, patient, or client to shift business away from the Company, but only if Employee established or substantially developed a direct relationship with that person through Employee's work. The clause does not directly or indirectly prohibit accepting or transacting business with a customer, patient, or client.

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 less than twice the Washington state minimum wage, nothing in this Agreement prohibits additional employment outside the Company, subject to the safety, scheduling, loyalty, and conflict provisions in RCW 49.62.070.

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. 2026 Chapter 149 Acknowledgment

The Parties acknowledge that 2026 Washington Laws chapter 149 voids all noncompetition covenants as of June 30, 2027. By October 1, 2027, the Company will make reasonable efforts to provide the written notice required by RCW 49.62.020(3) to each current or former worker whose covenant remains within its effective period.

13. Severability; Current-Law Reformation Consequences; Entire Agreement

If any provision is unenforceable, it shall be severed and the remaining provisions remain in effect to the extent they can operate independently. The Parties do not request expansion of a restriction. For a proceeding governed by the version effective before June 30, 2027, RCW 49.62.080(3) governs the damages and fee consequences if a court or arbitrator reforms, rewrites, modifies, or partially enforces a noncompetition covenant. Future RCW 49.62.080 instead applies its remedy to any violation of the chapter.

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
☐ Used the correct current/future nonsolicitation definition and separately reviewed any confidentiality, trade-secret/invention, transaction, franchise, or educational-repayment provision
☐ 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 (Franchisor restrictions) — https://app.leg.wa.gov/RCW/default.aspx?cite=49.62.060
• RCW 49.62.070 (Moonlighting) — https://app.leg.wa.gov/RCW/default.aspx?cite=49.62.070
• 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
• 2026 Washington Laws chapter 149 (ESHB 1155; effective June 30, 2027) — https://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.