In May 2019, Washington State enacted restrictions on the enforceability of noncompetition covenants. The law, which took effect on January 1, 2020, requires the state to annually adjust the income thresholds for workers who are subject to noncompetition covenants.
The noncompetition law, codified under Chapter 49.62 of the Revised Code of Washington (RCW), prohibits “noncompetition covenants” with Washington-based employees and independent contractors who earn less than a certain amount adjusted annually for inflation by the Washington State Department of Labor and Industries (L&I) on September 30 of each year. Currently, employers may not enter into noncompetition covenants with employees who earn less than $101,390 in annualized income or with independent contractors who earn less than $253,475.
Effective January 1, 2022, the adjusted amount for employees in 2022 will be $107,301.04 (as reported in Box 1 of the federal Form W-2) and the adjusted amount for independent contractors in 2022 will be $268,252.59. L&I’s adjusted amounts are calculated based on the federal Bureau of Labor Statistics’ Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which calculated a 5.83 percent increase in the CPI-W. Employers may want to draft noncompetition covenants to become effective once a worker’s annualized earnings satisfy the income threshold.
Ogletree Deakins’ Unfair Competition and Trade Secrets Practice Group will continue to track changes to Washington’s noncompetition law, which can be found at RCW 49.62, and will post updates on the firm’s Washington and Unfair Competition and Trade Secrets blogs as additional information becomes available. Important information for employers is also available via the firm’s webinar and podcast programs.