Washington State Non-Compete Legislation Dies on the Vine

Washington State Non-Compete Legislation Dies on the Vine

Two bills that would have all but banned the use of non-compete agreements by employers in Washington State did not come up for a vote before a February 14 deadline for moving forward in the current legislative session, GeekWire’s Monica Nickelsburg reports:

The House bill would have prohibited non-compete agreements for employees working fewer than 40 hours per week or earning less than 200 percent of the minimum wage. Independent contractors and employees taking a second job would have also been protected from non-competes.

The Senate bill is broader. It would have prohibited “any contract that restrains a person from engaging in a lawful profession, trade, or business of any kind,” except for an employee who sells all of his or her operating assets or ownership interest in a business entity to a buyer operating a “like business.” Exemptions would also have been made for partners who disassociate from a business partnership.

This is the third legislative session in which Washington lawmakers have tried and failed to pass restrictions on non-competes. Proponents of this legislation say it would help make the state more competitive with California, where the use of non-compete clauses is almost always prohibited, as a magnet for talent and business investment, particularly in the tech sector. However, Michael Schutzler, CEO of the Washington Technology Industry Association, tells GeekWire that this comparison is misleading and that it was wise for the legislature not to rush new legislation in this regard.

Most states restrict the use of non-compete agreements to the protection of trade secrets and other confidential information, but several other states are mulling new restrictions or blanket bans this year. Massachusetts, which aims to leverage its highly educated workforce to compete with Silicon Valley as a tech hub, failed to pass a ban in 2016 but is close to reaching a deal that would satisfy both houses of its state legislature. New Hampshire, Pennsylvania, and Vermont are also considering bills.

Non-compete clauses have come under increasing scrutiny in recent years amid reports of them being used to limit the employment options of workers who were unlikely to become privy to the kinds of trade secrets such clauses are meant to protect. Along with the theory that banning non-competes spurs innovation, this trend has been a major driver of legislative efforts to rein in the use of these clauses.

One Washington employer, Microsoft, is currently embroiled in a novel non-compete case in which IBM is suing to prevent its former Chief Diversity Officer Lindsay-Rae McIntyre from joining the Redmond-based software giant, arguing that she possesses knowledge of diversity data and methods that constitute IBM trade secrets and that she would likely use to the company’s competitive disadvantage at Microsoft.