A trimmed-back bill to change what is allowed in non-compete agreements passed the Washington House 97-0 Wednesday. It now goes to the state Senate.
“This bill is a small step forward to provide clarity (on non-compete agreements),” Stanford said at Wednesday’s floor vote. After the floor vote, he said, “It’s significantly scaled down.”
Rep. Matt Manweller, R-Ellensburg, said people should be allowed to work where they want.
“I support free market forces,” Manweller said. He also induced a non-compete bill in 2016 that did not make it out of committee. His 2016 bill was more employer-friendly than Stanford’s 2016 bill.
The 2017 bill will make non-compete agreements more worker-friendly for technology employees, temporary workers, independent contractors, musicians, and several categories of low-wage employees in the grocery, food and janitorial industries. This is a major issue in the state’s 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.
Microsoft and Amazon opposed the original 2017 bill, but are neutral on the revised version that passed Wednesday, Stanford said. He added that the topic of non-compete contracts will likely be brought up again in the 2018 session to further push items that were scaled back in the 2017 bill. The 2017 bill faces a business-friendly Republican-controlled Senate.
The original bill would have limited a non-compete clause in a contract to one year, set some complex guidelines on what is unreasonable in a non-compete contract, and set up guidelines on damages that an employee could receive if he or she successfully challenged a non-compete contract in court.
“Non-competes harm entrepreneurship and particularly impact women and underrepresented groups who are less likely to risk enforcement of the non-compete. Washington non-competes in the technology industry are some of the most onerous in the country. Non-competes hurt startups and technology worker careers, and Washington loses the talent of employees who leave the state,” is how a House staff memo characterized some of the testimony on the original bill before the House Labor & Workplace Standards Committee.
The revised bill — unveiled Wednesday — significantly narrows the previous proposed scopes and limits on non-compete contracts including how to address what is “unreasonable.” The details are legally complex.
The passed bill requires that all the terms of a non-compete contract be disclosed in writing before the worker signs the contract. Stanford said the business community had problems with the broad language and definitions in the original bill.
The House staff memo summarized some of the opposition to the original bill before the labor committee: “Assets such as good will, customer relationships, and other assets will be at risk. The state would be interfering with arms-length agreements with independent contractors. Non-disclosure agreements are not sufficient to protect business.”
According to the House staff memo, labor organizations and Google supported the original bill before the labor committee. The Washington State Hospital Association, Washington Hospital Services and the Association of Washington Business opposed the original bill. The Washington Technology Industry Association, the Washington Food Industry Association and the Washington Department of Commerce gave input that neither fully supported nor fully opposed the original bill.
That staff memo said testimony in favor of the original bill argued that non-compete agreements are overused and should be only used to protect time-sensitive and confidential information. Few non-compete contracts are actually negotiated, it said.
“It does not make sense to lay someone off and then say you cannot work anywhere else. The courts have upheld a five-year non-compete. The geographic scope may be so broad the person cannot find a job. A person should be able to continue working in their profession,” the memo said in summing up support for the original bill.
The majority of the opposing testimony addressed the medical and food industries.