OLYMPIA, Wash. — Business interests lined up Monday against two Washington House bills that seek to ban some or all non-compete provisions from employment contracts.
The Washington Technology Industry Association, the powerful Association of Washington Business, the Washington State Hospital Association, the Independent Business Association and Washington Food Industry Association all spoke in opposition to the bills at a hearing before the House Labor & Workplace Standards Committee.
Testifying in favor of the blanket ban on non-compete agreements were employment law attorneys, the Washington State Labor Council, the American Federation of Musicians, and the United Food & Commercial Workers union, plus a doctor, another health care worker, a musician and a grocery employee.
No individuals or employee-related groups from the tech industries showed up to testify in favor of banning non-compete requirements.
The bills would bring Washington state more in line with California law, preventing companies from keeping departing employees from taking similar jobs at competing companies for specified periods of time after they leave.
It’s a hot-button issue in the technology industry. Companies in Washington state, including Microsoft and Amazon, have repeatedly used non-compete clauses in employment agreements to keep former executives and engineers from working for rivals. Amazon has even reportedly used non-compete requirements when hiring seasonal warehouse workers.
A bill by Rep. Derek Stanford, D-Bothell, would render void unreasonable competition agreements. “Unreasonable” non-compete agreements cover those for seasonal and temporary employees, laid-off employees, those terminated without just cause, and those involving independent contractors. It also forbids non-compete requirements that last for more than one year from the end of employment, and for employees who are not executives. (Editor’s Note: Summary of Stanford’s bill corrected since original post.)
A bill by Rep. Matt Manweller, R-Ellensburg, would ban non-compete requirements for a few professions with the idea of gradually adding other professions later on a case-by-case basis. Manweller’s bill would initially ban non-compete requirements for hair salon and manicurist employees, drywall applicators, musicians and fast-food workers.
Stanford cited a couple examples of tech employees being harmed by non-compete provisions to which they had no choice but to agree, if they wanted the work. One case was a tech worker being handled by a temporary employment agency who was not allowed to seek tech work via another temp agency. The other example was a temporary employee who was harassed at her job and was prevented from moving to a similar job elsewhere by a non-compete requirement.
He said employees have no negotiating strength when they have to sign a non-compete agreement as they are processed into a new company.
Jesse Wing, representing the Washington Employment Lawyers Association, echoed that observation. “If someone can truly negotiate his own contract, (non-compete agreements) should allowed. But most non-competes are coerced,” he said.
Dan Kalish, also of the Washington Employment Lawyers Association, added that it’s often non-executive employees who don’t have the market power to negotiate the terms of a non-compete. He said that negotiating and later fighting non-compete requirements would be too expensive for employees bound by them.
However, Michael Schutzler, CEO of the Washington Technology Industry Association, said there is a legitimate concern about the effects of engineers leaving companies with specialized knowledge and then competing head-to-head with their former employers. The engineers are key to the intellectual property of many high-tech firms that they are leaving, Schultzer said.
Schutlzer also downplayed the extent of non-compete requirements on high-tech workers — at least not enough to warrant a state law on the matter. “There is no substantive non-compete issue,” he said.
Bob Battles, representing the AWB, agreed that current laws on the books are sufficient to handle any non-compete requirement abuses. “We don’t believe (a new law) is necessary,” he said.
Testimony from other business interests focused on sales and regional managers in the food and grocery industries leaving companies with specialized knowledge about the geographical areas and customers that they served.
This is the second year in which Stanford has tried to get this bill through the Legislature. The Labor & Workplace Standards Committee is scheduled to vote on Stanford’s bill on Tuesday afternoon.