Washington state has updated and clarified its law regarding restrictive covenants. Effective June 6, 2024, the legislation provides that a noncompetition covenant now “includes an agreement that directly or indirectly prohibits the acceptance or transaction of business with a customer.” Customer non-solicitation covenants are now limited to current customers. Other updates include:
- The prior definition of a noncompetition covenant did not address or include –
- the standard provision that prohibits accepting business from a customer of a prior employer. The new definition clarifies this issue, and now states that “[a] ‘noncompetition covenant’ also includes an agreement that directly or indirectly prohibits the acceptance or transaction of business with a customer.”
- agreements in which the individual signing the agreement either
- purchased or sold the goodwill of a business, or
- acquired or disposed of an ownership interest.
Under the new law, the sale, acquisition, or disposal of an interest in a business must be “one percent or more of the business.”
- Any noncompetition covenant for a Washington-based employee or independent contractor must be litigated in Washington, and have Washington law applied to the agreement.
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