The issue of noncompetes, nonsolicitation, and nondisclosure
agreements comes up often in an employment law practice. Just in the last month I performed work on
these issues for three different clients. Recently, there have been several
more public disputes on these issues – Microsoft and Google (“ABC News: Microsoft, Google Settle Over Employee”), for
example. The biggest problem I encounter is the employee’s belief, based on
something their cousin’s brother’s attorney told them once, is that a
noncompete is probably not worth the paper it is written on.
At least in the state of Washington, the answer to the
question “is this noncompete valid?” is a typical, legalese answer of
“maybe.” Non solicits and non
disclosures are typically more favored, and I’ll address them at the end of
this post.
Washington courts will enforce a “reasonable”
noncompete. In general, the following
three prong test applies: (1) Whether the restraint on the employee is
necessary for the protection of a legitimate business interest or the goodwill
of the employer; (2) whether the
restraint imposed upon the employee is any greater than reasonably necessary to
secure the employer’s business interest or goodwill; and (3) whether the degree of injury to the
public is such a loss of service and skill of the employee as to warrant a
refusal to enforce the noncompete. Furthermore, as these types of “agreements” are contracts, there must be
consideration to support the contract. (Consideration being what each side gives up and gets in return for
executing the contract. An interesting
issue arises when the noncompete is presented in the middle of employment, not
at the beginning or in exchange for a severance payment. (See Supreme Court Requires Washington Employers to Specifically Bargain for Agreement Not to Compete and Labriola v. Pollard Group, Inc. 152 Wn.2d 828, 100 P.3d 791 (2004)).
All three of these items are very fact based, open to
interpretation and often lead to contrary results. “Tiptoeing Through The NonCompete Legal Minefield”| Boston Business Journal It also is an area
where the law varies wildly from state to state. Last time I checked (and keep in mind I am NOT licensed in these states), California had pretty
much regulated noncompetes out of existence; Florida’s position seemed to
change with almost every new legislative session; Massachusetts allowed
enforcement for some, but not all, professions; and Oregon had created a very
specific statutory provision to guide the interpretation of noncompetes.
In general, Washington courts are more likely to enforce
nonsolicitation and nondisclosure agreements. The theory being, I think, that it is one thing for a business to tell
someone that they cannot work in their field, and quite another for a business
to protect itself from piracy (of employees, knowledge, secrets). Even if the clause does not make specific reference
to it, Washington courts look to the Uniform Trade Secrets Act, RCW 19.108.010
et seq., for guidance. “[A] former employee may use
general knowledge, skills and experience acquired during the prior employment
in competing with a former employer. However, an employee may not use or disclose trade secrets belonging to
the former employer to actively solicit customers from a confidential customer
list.” Ed Nowogroski Ins., Inc. v. Rucker, 137 Wn.2d 427, 450, 971 P.2d 936 (1999).
(Restored and converted into office space by attorney David Leen in 1986)