Non-Compete Agreements: Are They Still Enforceable?
Non-compete agreements have become a common feature of employment contracts, often used to protect a business’s interests when employees leave. These agreements typically restrict an employee from working for a competitor or starting a similar business for a defined period after leaving a company.
For anyone entering a non-compete arrangement—or facing potential enforcement—knowing the laws is critical. Understanding the key elements of these agreements and the factors courts consider can help both employees and employers make informed decisions about their rights and obligations.
At Curiale Hostnik PLLC, we assist clients in Tacoma, Washington, and throughout Pierce County, including Puyallup, Gig Harbor, and University Place. We recognize the growing attention surrounding employment law and these agreements. Our focus is on helping businesses and employees understand and address the challenges of non-compete agreements.
What Is a Non-Compete Agreement?
A non-compete agreement is a contract between an employer and employee that restricts the employee’s ability to work in certain capacities after leaving the company. These agreements often include three main elements:
Duration of restriction: The period a former employee is restricted from competing with their employer typically ranges from six months to several years. This timeframe plays a significant role in determining enforceability.
Geographic scope: Employers may limit competition to specific cities, counties, or states. Broader geographic restrictions are more likely to be challenged in court.
Scope of work: The agreement may restrict work in the same industry, with a direct competitor, or in roles that involve confidential knowledge from previous employment.
These clauses are intended to protect sensitive business information, client relationships, and intellectual property. Courts weigh these protections against an individual’s right to pursue a livelihood, making the enforceability of non-competes a delicate balance.
State Approaches to Non-Compete Agreements
Enforceability of non-compete agreements varies significantly from state to state. Some states, such as California, prohibit them outright for most employees, while others, such as Washington, allow them under specific circumstances. Washington recently implemented new restrictions in employment law, limiting enforceable non-compete agreements to employees earning above a certain annual income threshold.
Who Is Affected by Non-Competes?
Non-compete agreements aren’t limited to executives or high-level employees. They can affect a variety of roles, including:
Sales employees: Restrictions often target client relationships and sales territories. These employees may face restrictions that prevent them from contacting prior clients or working in the same sales region.
Technical staff: Engineers, developers, or designers may face limits to prevent the sharing of proprietary technology or designs they worked on for their previous employer.
Healthcare professionals: Doctors, nurses, and other practitioners may encounter clauses that restrict practice within certain regions, which can impact patient care access.
Understanding how these agreements apply to specific roles can help both employers and employees make informed decisions. This knowledge clarifies their rights and obligations under employment law.
Circumstances Supporting Non-Compete Validity
Non-compete agreements are generally more likely to be enforceable when they meet certain standards. The key factors that courts look for include:
Protection of legitimate business interests: Courts typically require the employer to demonstrate that the agreement protects trade secrets, confidential information, or client relationships. Agreements with a clear focus on protecting business-critical information are more likely to hold up.
Reasonable duration: Short-term restrictions are more likely to be enforced than multi-year prohibitions. Generally, durations of less than one year are deemed reasonable.
Geographic limits tied to business operations: Restricting competition to areas where the company operates strengthens enforceability and demonstrates fairness.
Even when these elements are present, courts sometimes modify or “blue pencil” agreements to make them reasonable. This approach allows part of the agreement to remain enforceable rather than rejecting it entirely.
When Non-Compete Agreements May Not Be Enforced
Certain factors can prevent the enforcement of a non-compete agreement. These include:
Overly broad restrictions: A clause that prevents employment across an entire industry or large geographic area may be invalid and unenforceable.
Low compensation thresholds: In states such as Washington, agreements with employees earning below the minimum salary threshold may not apply. This confirms fairness for lower-wage workers.
Public interest concerns: Non-competes that limit access to essential services, such as healthcare, are often struck down by courts.
Voluntary termination scenarios: Some courts are less likely to enforce non-competes against employees who quit rather than are terminated for cause, especially if the agreement seems punitive.
These exceptions highlight the importance of consulting a lawyer experienced in employment law. Speaking with one of our professionals before signing or challenging a non-compete can help protect your rights and avoid legal issues.
Alternatives to Non-Compete Agreements
Some businesses use other methods to protect their interests without relying on non-compete agreements. These alternatives can reduce legal challenges and still protect sensitive information:
Non-disclosure agreements (NDAs): These focus specifically on protecting confidential information and trade secrets, without restricting general employment. NDAs allow employees to work elsewhere while protecting the employer’s proprietary information.
Non-solicitation agreements: These restrict former employees from soliciting clients or employees rather than preventing employment altogether. They focus on maintaining relationships rather than controlling career paths.
Garden leave agreements: Employers may require an employee to remain on the payroll for a set period after departure, while restricting them from engaging in competitive work. This approach offers compensation during the restriction and helps prevent immediate competition.
These options often offer sufficient protection for businesses and employees. They also reduce the risk of disputes over non-compete enforcement.
Challenges Employees Face With Non-Competes
Employees bound by non-compete agreements can face significant challenges. These challenges may affect their job opportunities, finances, and overall career growth, as outlined below:
Limited job opportunities: Geographic or industry restrictions may reduce available positions, limiting professional growth.
Financial uncertainty: Enforcement could prevent earning a living for months or years, creating stress and hardship.
Legal costs: Challenging or defending a non-compete often involves legal expenses and time, which can be burdensome for employees.
Our attorneys can help employees assess the enforceability of agreements. We can also guide clients through options such as negotiation or legal challenges.
Businesses Can Protect Themselves
Employers can take steps to protect their interests while reducing the risk of unenforceable agreements. These steps include:
Draft clear, reasonable agreements: Avoid overly broad terms in scope, duration, or geography to reduce the risk of challenges.
Link agreements to compensation or promotions: Consideration strengthens enforceability and shows mutual benefit.
Focus on trade secrets and confidential information: Avoid blanket restrictions on general employment to make agreements more defensible.
Review agreements regularly: Employment laws and court interpretations change, so periodic review helps maintain compliance.
At Curiale Hostnik PLLC, we help businesses create agreements that align with current employment law and make sure they protect legitimate business interests while remaining enforceable.
Review Your Employment Agreement With Us
If you’re dealing with a non-compete agreement or have questions about employment law, Curiale Hostnik PLLC can help. Our experienced attorneys provide clear guidance on whether your agreement is enforceable and on the next steps you can take.
We assist clients in Tacoma, Washington, and cities throughout Pierce County, including Puyallup, Gig Harbor, and University Place. Don’t let uncertainty affect your career or business. Reach out to us today and discuss your situation.