This statute, which was enacted in 2019, prohibits employers from restricting an employee that earns less than twice the state minimum hourly wage (a “Qualifying Employee”) from having an additional job or supplementing their income subject to two exceptions. The first excepts instances where an employer limits a Qualifying Employee from engaging in activities that raise issues of safety or interfere with normal scheduling expectations. The second exception, the subject of Freedom Vans, provides that the general prohibition does not alter obligations the employee owes its employer under existing law, including the common law duty of loyalty.

In Freedom Vans, two Qualifying Employee plaintiffs sued their employer on behalf of a class, alleging the noncompete agreement the employer required all employees to sign violated RCW 49.62.070. The subject noncompete agreement prohibited the employees from “directly or indirectly engag[ing] in any business that compete[ed]” with the employer during their employment. The agreement defined “direct or indirect competition” as including, but not limited to, “engaging in a business as owner, partner, or agent” or “becoming an employee of any third party that is engaged” in a “competitive business.” The employer, in reliance on the common law duty of loyalty, argued that current employees should not be able to provide any kind of assistance to a competitor.

There is no published case law providing guidance on how RCW 49.62.070 relates to the common law duty of loyalty. The Washington State Supreme Court was thus required to clarify to what extent an employer can restrict an employee from providing services to competitors during their employment in light of the statutory restriction and common law duty.

The Washington State Supreme Court concluded that an agreement that broadly restricts Qualifying Employees from assisting competitors violates the statute. The Court acknowledged that the statute does not require the employer waive the employee’s duty of loyalty, but further explained that it was the intent of the legislature to facilitate workforce mobility and that the exceptions to the chapter be narrowly construed. According to Freedom Vans, an agreement restricting a Qualifying Employee from obtaining supplemental employment does not violate RCW 49.62.070(1) so long as the agreement is “reasonable” in light of the facts and specific provisions within the noncompete agreement. Reasonableness will be considered on a case-by-case basis and must be consistent with the intent of the statute—to protect Qualifying Employees, facilitate workforce mobility, and construe the exceptions narrowly. Factors courts will consider in assessing reasonableness are (1) whether there is a need to protect the employer’s goodwill, (2) whether restraint on the employee is reasonably necessary, and (3) whether enforcing the agreement violates public policy.

The Washington Supreme Court did not rule on the subject noncompete agreement in Freedom Vans. Instead, the Court remanded to the superior court to determine whether the noncompete agreement is reasonable and enforceable under RCW 49.62.070.

Washington employers should review their employment agreements with Qualifying Employees (which as of this post is an employee that makes less than $69,305.60 a year), employee handbooks, and policies to ensure compliance with RCW 49.62.070 in light of the Washington State Supreme Court’s interpretation and guidance set forth in Freedom Vans.

For more information, please contact any employment law attorney at Montgomery Purdue.