By Jeffrey Herman

Noncompete Contracts in General
In many occupations and professions, employers can make enforceable noncompete covenants with employees. Washington case law shows that opticians, accountants, tire salesmen, and even blacksmiths may have a noncompete covenant enforced against them. Washington courts will enforce the covenant so long as it governs a reasonable geographic area for a reasonable time. Wood v. May, 73 Wn.2d 307, 438 P.2d 587 (1968).

“It is well established that covenants not to compete upon termination of employment are enforceable if they are reasonable. Whether a covenant is reasonable involves a consideration of three factors: (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 employer’s business or goodwill, and (3) whether the degree of injury to the public is such loss of the service and skill of the employee as to warrant nonenforcement of the covenant.” Knight, Vale and Gregory v. McDaniel, 37 Wn. App. 366, 680 P.2d 448 (Div. 2 1984).

Even if a noncompete covenant is reasonable, several arguments will limit or defeat a noncompete covenant. If the noncompete covenant covers an unreasonable area, such as a 100 mile radius from the employer’s business, it may not be enforceable as written. Wood v. May, 73 supra. Also, if it is to last for more than two years, it may be unreasonably lengthy. Id. A perpetual noncompete covenant is unenforceable even if it covers only a very restricted geographic area. Schneller v. Hayes, 176 Wash. 115, 28 P.2d 273 (1934).

A noncompete covenant may not be enforced if it is “greater than reasonably necessary to protect the business or good will of the employer.” Central Credit Collection Control Corp. v. Grayson, 7 Wn. App. 56, 499 P.2d 57 (Div. 2 1972).

A noncompete covenant is also unenforceable unless it is supported by consideration. For example, where an employee is hired on specified terms and later the employer insists on a noncompete, without providing new consideration, the noncompete covenant is void due to lack of consideration. Schneller v. Hayes, 176 Wash. 115, 28 P.2d 273 (1934), see also Labriola v. Pollard Group, Inc., 2004 WL 2533876 (2004).

Attorney Noncompete Contracts
Noncompete covenants restricting attorneys are forbidden by the Rules of Professional Conduct. RPC 5.6 provides:

A lawyer shall not participate in offering or making:

    a) a partnership or employment agreement that restricts the rights of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement; or

    b) an agreement in which a restriction on the lawyer’s right to practice is part of the settlement of a controversy between private parties.

Under this RPC, it is unethical for an employing attorney to propose or enter into a noncompete agreement, and it is also unethical for an employee attorney to agree to it.

Formal Opinion 192 of the Washington State Bar Association is the single exception to the rule. The opinion holds that sale of a law practice is permissible, and that a noncompete agreement is permissible when “entering into an agreement by which the Selling Lawyer agrees not to compete for clients against the Purchasing Lawyer in the future.” Formal Opinion 192 (1996).

Taking these opinions together, it is unethical for attorneys to enter into a noncompete agreement unless they are making the agreement with a seller or purchaser of a law practice. Such an agreement must be reasonable as to duration and area. It must be supported by consideration. It also must be necessary for the protection of the employer’s business, may not impose restraints greater than those necessary to protect the employer, and must not unreasonably deprive the public of the service and skill of the employee.

So, associate attorneys can open their own practices that compete directly with their former firms unless they are purchasing the former employing firm’s practice. Even if such an agreement is made, it must pass all of the tests above. This means that attorneys have much greater freedom to leave their current employers and compete with them than members of other professions.

Freedom of contract is a beautiful thing.