A bill imposing new restrictions on non-compete agreements passed both houses of the Washington state legislature this week. Gov. Jay Inslee is expected to sign the bill into law in the coming weeks.
If all goes according to plan, non-compete agreements will be void in the state of Washington unless they meet certain standards. The contracts in question restrict employees with knowledge of sensitive business information from taking similar roles at other companies. Non-compete agreements are a lightning rod in the tech industry, with proponents claiming they protect trade secrets and critics arguing they stifle innovation.
Under the new rules, non-compete agreements will only be enforceable if:
- An employee earns more than $100,000 a year
- An independent contractor earns $250,000 a year from the employer proposing a non-compete
- The employer discloses terms of the non-compete when making an offer or earlier
- The employer compensates employees that are laid off but still subject to non-compete agreements
- The non-compete agreement doesn’t cover a period longer than 18 months
Michael Schutzler, CEO of the Washington Technology Industry Association, said he is “pleased to see some progress in reforming non-competes for the benefit of workers who should not be subject to those constraints.”
But he is concerned that the salary thresholds could disadvantage startups.
“We remain concerned that the compromise language reached creates an advantage for large corporations over startups in the war for talent,” Schutzler said. “We will closely monitor the impact of this new law and will aggressively advocate for modifications if our fears prove warranted.”
The bill’s sponsor, Rep. Derek Stanford, dismissed that concern. He said the bill will help startups recruit workers that were previously restricted by non-competes.
“I’ve heard exactly the opposite from the startup community, from people who say non-competes have been a huge pain in being able to recruit people,” Stanford told GeekWire. “In California, non-competes have been banned for a century and that has not impeded their tech startup world.”
If Inslee signs the bill into law, it will take effect Jan. 1, 2020. Stanford says he’s been in touch with the governor and expects him to sign the bill.
Despite a majority in both state houses last session, Democrats failed to get non-compete legislation across the finish line.