Could Washington be the next state to ban noncompete agreements? The move could have serious implications for the Eastside’s technology industry.
Many tech workers sign noncompete agreements, which prevent them from getting similar jobs at different companies. Companies fear that the workers will bring trade secrets and knowledge of intellectual property to competing firms.
However, the agreements have been used to apply to a wide variety of people — from temporary contract workers who switch companies every few months to hairstylists who are barred from taking customers from one salon to another and restaurant workers who make sandwiches for Jimmy John’s.
Washington state Rep. Derek Stanford, D-Bothell, wants to change that. His House Bill 1926 would ban noncompetes except in a few circumstances. His proposal was heard earlier this month in the House Labor Committee, which will decide whether the bill will move forward.
Stanford differentiated between a noncompete agreement and a nondisclosure agreement, which would bar a worker from bringing knowledge of intellectual property to a new employer.
“A software engineer working on a temporary contract who has to sign a noncompetition agreement that says, you’re not able to work on any other company that works on software, that’s far too broad and abusive,” Stanford said.
Stanford’s bill would make Washington’s law more like California’s, where noncompete clauses have been illegal since 1872, and employees are generally free to move about different companies and start their own businesses. However, even that has a shaded history. Several Silicon Valley companies including Apple, Google, Intel Corp., and Adobe Systems Inc. came under fire in a lawsuit last year that accuses them of conspiring not to poach each other’s employees for several years, according to a Bloomberg Business News report.
Fast Company reported that Washington is one the few states that already limits noncompete clauses. Most other states allow them without restriction.
The bill would also end noncompete agreements in the media broadcast industry, where it’s not unusual for reporters or producers to sign contracts that require a period of time before they can work at a similar job in the same market.
However, several employers told lawmakers in early February that noncompete agreements protect valuable customer relationships and intellectual property.
Jeff Kirby, of Puget Sound Sound Security Patrol, said one employee cost his company a $1 million contract with a large company by offering the same level of service as his company, but for a cheaper price.
“We don’t want to limit trade,” he told lawmakers. “We want to have recourse against someone with no moral turpitude.”
Aaron Rocke, an attorney, says noncompete agreements are a necessary tool of business and courts often do not enforce overly broad contracts. He said that having a nondisclosure clause is not sufficient because of “inevitable disclosure.”
“Even if you promise not to tell your workers what you learned at Bing, it’s kind of hard to do your job at Google without using the things you’ve known,” Rocke said.
Another bill, House Bill 1577, would restrict noncompetes for wage earners who earn less than $39,500 a year. But Elissa Goss, an intern with the Washington State Labor Council, said that all noncompete agreements inhibit economic growth because people are forced to avoid work for a time in their areas of expertise.
“Noncompetes harm the worker, local businesses, and our economy, and in a state like Washington that thrives off innovation, we should really look at not enforcing noncompetes.”