Employers in Washington may not enforce non-competition agreements signed by employees after an employment relationship has already begun unless the employer provides the employee with something of value in exchange for the non-competition agreement. On November 10, 2004 the Washington Supreme Court unanimously decided, in Labriola v. Pollard Group, Inc. that a noncompete agreement signed five years after the beginning of an employment relationship was not enforceable since the agreement lacked new consideration, i.e. something of value bargained for on both sides of the agreement. Consistent with prior appellate caselaw, the employer in Labriola argued that giving the employee training was consideration for signing the non-compete agreement. The court disagreed. Instead, the court held that the employer failed to show that the training the employee received after signing the non-compete agreement was any different from training the employee would have received without signing the noncompete agreement – thus nothing was done in exchange for the new agreement. In addition, the noncompete agreement did not state that Employer's training served as legal “consideration” in exchange for employee's promise not to compete.
As a practical consequence, employers seeking non-compete agreements from current employees must give one or more of the following items in exchange for the employee's signature: a promotion, increased wages, a bonus, a fixed future term of employment, or perhaps access to protected information. Training may be consideration if the employer clearly states that the employee will receive additional training only if the noncompete is signed. In light of this decision, employers should reevaluate all existing noncompete agreements to ensure that they will be enforceable.
Nothing in this decision changes the general rule in Washington that consideration exists if the employee enters into a noncompete agreement before he or she is first hired.