Washington lawmakers’ efforts to crack down on non-compete agreements died in the state legislature this week.
Two bills that would have made it nearly impossible to enforce the controversial contracts, which temporarily prevent workers from taking jobs with employers’ competitors, blew past their Feb. 14 deadline without moving forward in the legislative process.
A Senate bill and House bill were on the table this legislative session. Both bills made it out of committee but neither was called up for a final vote to pass each respective chamber by the Feb. 14 cutoff.
The House bill would have prohibited non-compete agreements for employees working fewer than 40 hours per week or earning less than 200 percent of the minimum wage. Independent contractors and employees taking a second job would have also been protected from non-competes.
The Senate bill is broader. It would have prohibited “any contract that restrains a person from engaging in a lawful profession, trade, or business of any kind,” except for an employee who sells all of his or her operating assets or ownership interest in a business entity to a buyer operating a “like business.” Exemptions would also have been made for partners who disassociate from a business partnership.
Lawmakers tried to push through similar bills in the 2016 and 2017 legislative sessions to no avail.
Michael Schutzler, CEO of the Washington Technology Industry Association expressed relief that lawmakers didn’t hurry to push a bill through this session. “A new non-compete law can easily help or hurt our state,” he said. “It should not be rushed for political expediency.”
Schutzler has been outspoken about non-compete agreements, an indication of how hot-button the topic has become in the tech industry.
Some in the tech industry believe non-competes hinder innovation. In a guest commentary for GeekWire, Founders’ Co-Op Partner Chris DeVore, cited California as an example:
California — and specifically the Bay Area (for tech) and Los Angeles (for entertainment) — is the undisputed global leader in innovation, and has the huge public companies and massive wealth- and job-creation to show for it. California banned non-compete agreements in 1872 — over a hundred years ago — and many economists point to the free movement of talent between companies and to new startups as one of the most important enablers of California’s massive lead in the global innovation economy.
Schutzler countered in an interview with GeekWire this week, claiming that defacto non-competes are in place in California all the time.
“The specious argument [is] often made that California doesn’t have non-competes so therefore Washington shouldn’t either is based on a false premise,” he said. “California does have non-competes. They have well-documented collusion. They have service contracts negotiated on exit. But even more importantly, Washington has a higher concentration of inventions, patents filed, and software developers than California partly because strategic and financial investors have confidence in our ecosystem.”
In California, companies like Apple and Google; Lucasfilm and Pixar; and others have reached settlements after they were exposed for agreeing not to poach one another’s employees.
Non-compete agreements have become a lightning rod as tech companies fight fiercely for a limited talent pool and try to protect proprietary information. Just this week, IBM sued its former diversity chief for taking a job with Microsoft in an effort to enforce a non-compete that left some lawyers scratching their heads.
Given the swelling debate over non-competes, it is likely that the Washington state legislature will circle back on the issue in the future.