New legislation introduced in the Washington State House of Representatives would make it much tougher for employers in the state to use non-competition agreements to limit the ability of employees to work for rival companies after they leave.
HB 1926, which had its first reading last week, would bring Washington state law more in line with California’s approach to non-competition agreements, banning non-compete deals except in the case of a business sale.
Seattle-area tech companies such as Microsoft and Amazon have repeatedly enforced non-competition clauses in employment agreements to keep former executives, engineers and others from working for competing companies for as long as 18 months. In many situations, the cases are filed in Washington state court, seeking a legal advantage over California-based rivals such as Google and Salesforce.
The bill was introduced by Rep. Derek Stanford, a Democrat who represents Washington’s 1st District, including Kirkland and Bothell in the high-tech Eastside corridor.
Contacted by GeekWire about the legislation, Stanford explained that he has “heard too many examples of non-compete clauses being enforced arbitrarily and punitively, without any connection to a legitimate business need.”
“Businesses do need to protect proprietary information, such as trade secrets or customer lists, and this need is well addressed with non-disclosure agreements,” Stanford said. “Taking away a person’s right to go find a new job – whether to take on more responsibility, or to get out of a bad situation, or whatever – is a tremendous demand which should never be regarded as just a standard contract clause.”
If the bill is signed into law, he said, “workers will be free to move to a new job when they choose to, without the fear that their ex-employer will sue to keep them locked out of their profession. This will allow market forces to reward good employers, and it will let workers make rational choices about where they work.”
We’ve contacted Microsoft and Amazon to find out their positions on the legislation.
The bill already has the support of Seattle-area startup leaders including investor Chris DeVore, the managing director at Techstars Seattle, who has called for an end to non-compete agreements as a way of boosting entrepreneurial activity and the availability of tech talent.
— Chris DeVore (@crashdev) February 7, 2015
Stanford notes that the implications of non-compete agreements extend well beyond the tech industry, creating problems for musicians, construction workers, healthcare professionals, janitors, hair stylists, and others.
COMMENTARY: If non-competes help innovation, why does the state that bans them kick everyone else’s ass?
Media professionals are also impacted. Seattle-area consumer reporter Jesse Jones, for example, is currently waiting out the term of a non-compete agreement with his former employer, KING-TV, before he starts his new job at KIRO-TV.
In one high-profile case nearly a decade ago, Microsoft sued in Washington state to keep a former executive, Kai-Fu Lee, from taking a job with Google in China. The company similarly sued over general manager’s Matthew Miszewski’s move to Salesforce in 2011. Amazon also has leveraged non-compete deals repeatedly. Last year, for example, the company tried to keep a former Amazon Web Services strategic partnerships manager, Zoltan Szabadi, from taking a new job with Google Cloud Platform.
Rep. Stanford says the influx of legislation reflects “a surge of interest in this issue which has not been seen in recent years.” He adds, “With this level of momentum, I expect to see major reform either this year or next.”