More on Covenants Not To Compete
June 23rd, 2006
The general rule in Washington is that restrictions are still upheld, if they meet the test of showing that they are not greater than are reasonably necessary to protect the business or good will of the employer, even though they restrain the employee of his liberty to engage in a certain occupation or business, and deprive the public of the services, or restrain trade.
The factors are: (1) whether restraint is necessary for the protection of the business or goodwill of the employer, (2) whether it imposes upon the employee any greater restraint than is reasonably necessary to secure the business of the employer or the goodwill thereof, and (3) whether the degree of injury to the public is such loss of the service and skill of the employee to warrant nonenforcement of the covenant.
A term of five years may be as far as courts will go. However, it appears that the courts may be willing to give more deference as to the reasonableness of a covenant when it is given as part of the sale of the business as opposed to being given solely as part of an employment arrangement. (In other states like California, a covenant may not be even be enforceable unless it is given in connection with a sale of a business.)
Furthermore, Washington courts have the power to modify an overly broad covenant not to compete to make it reasonable.
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