Start 2010 Right: Is Your Non-Compete Enforceable?

As we enter a new decade, many are looking to hit the “reset” button in their career by either branching off on their own or joining a competing company. Before making such changes, many individuals have approached me with valid concerns over the enforceability of their non-compete agreements with their current employers.

Governing Law

In reviewing your non-compete agreement (NCA), you must first determine what state law governs it. Absent a “governing law” clause in the agreement, Washington State law likely applies, so long as your employer and/or you are based in Washington State.

No Bright Line Rule

Washington State law provides no bright line rule in determining whether a particular NCA is enforceable or not. Courts enforce an NCA only where principles of equity (fairness) are upheld. Essentially, the rule is that an NCA is enforceable so long as its restrictions are not greater than are reasonably necessary to protect the business or good will of the employer, even though they restrain the employee of his/her liberty to engage in a certain occupation or business, and deprive the public of the services, or restrain trade. Such determinations are made on a case-by-case basis.

Multi-Factor Analysis

Washington courts go through a multi-factor analysis in determining whether an NCA is enforceable, including:

  1. whether employer offered marketable skills training to employee in exchange for employee’s promise to not compete. An NCA is a contract. In order for a contract to be enforceable, the employee must receive something from the employer in exchange for his/her promise to not compete with the employer. Such promise is usually in exchange for the employer training the employee on certain technology, skills, trade or knowledge;
  2. whether employer’s former clients, who are now seeking services of competitor, were solicited or voluntarily disengaged from the former employer prior to joining competitor;
  3. reasonableness of the duration and geographic reach of the restriction. A court will not enforce a restriction that unduly hinders the employee’s efforts to earn a livelihood within a reasonable distance from the former employer;
  4. whether employee, either directly or indirectly, solicited or diverted current clients of former employer;
  5. whether employee’s action has harmed former employer’s business, as opposed to other competitor’s providing such services to clients;
  6. whether the public’s access is unnecessarily and unreasonably restricted to service and skill of the employee. The law promotes the reasonable exchange of services in the marketplace between employees and prospective customers, barring any substantial hardship imposed upon the former employer.

Copyright 2010 The Filutowski Law Firm, PLLC.This post is intended for general information purposes only and should not be construed as legal advice or legal opinions on any specific facts or circumstances. An attorney-client relationship is not created or continued by reading this post. If you would like further information regarding the matters discussed herein, you may post a comment. If you need a consultation on a legal matter, contact Alexandra Filutowski.