Covenants Not to Compete--Sign with Extreme Caution
Posted Thursday, July 10, 2014 by Michael A. Larson
IIn Washington state, employment covenants not to compete are generally enforceable. It is not unusual to be handed a covenant not to compete on the first day of a job or during employment with a short deadline to sign and return the document. More often than not, these “confidentiality and noncompete agreements” are signed without input as to their legal consequences.
When it becomes time to search for new employment or leave the job, only then does the harsh reality that years of experience in an industry or profession is basically useless because of an agreement not to compete in those capacities sometimes in the entire world.
Basically, often for a few dollars, the employee signs away perhaps hundreds of thousands of dollars in employment compensation if they were able to work in an industry or profession where the employee can use their most highly desirable qualifications.
Some states, the state of California is an example, covenants not to compete in the employment context are not enforceable. In the state of Washington, there is a long history of judicial decisions and law supporting the enforcement of covenants not to compete. One possible reason covenants not to compete have not been challenged, is the employer has the resources and interest to enforce the covenants. The employee or potential employer often doesn’t or cannot contest the covenant because of the costs and risks involved.
Recently, as high-tech employers have sought the employees of competing companies, employers have been willing to finance expensive legal battles over the enforceability of noncompetition agreements. So general restrictions such as a covenant not to work in the software industry worldwide or work for customers of a worldwide conglomerate, are not being enforced by the courts. When every employee of a large company signs a one size fits all agreement of such immense consequences, courts are more likely to declare the covenant as unreasonable and thus unenforceable.
Bottom line, before you sign a covenant not to compete, take the time to become aware of the consequences of such agreement. If you have already signed a noncompete agreement, it is probably worth getting an opinion about the consequences of your situation.
If you have any questions, feel free to contact Mike Larson at (206) 340-1131 or MLarson@PivotalLawGroup.com.