Bobadilla v. The Departing Employee
What can you do to protect your client relationships, your pricing, and the rest of your team when an employee leaves after Washington’s non-compete ban becomes effective?
Washington's non-compete ban eliminates what used to be the most common tool for protecting client relationships from departing right along with an employee. What gives an employer the best shot at replacing its protections is a combination of three documents: a narrowly drafted customer non-solicitation agreement, an employee non-solicitation agreement, and a confidentiality agreement that covers the business information you want to protect. None of them does exactly what a non-compete did, but together they cover the real risk to employers in the way it manifests most.
The question most Washington State employers are asking about HB 1155 is pure practicality: if I can't stop a departing employee from going to work for a competitor, what can I do? My answer: it depends on what you're trying to protect. Most of the time the real concern whether they take your clients, your team, and your pricing strategy with them – you probably don’t really care where they’re going to work.
What does a customer non-solicitation agreement protect?
While complying with HB 1155, a customer non-solicitation agreement can prohibit a departing employee from soliciting current customers with whom they established or substantially developed a direct relationship through their work for you. That last phrase is critical. Think about interpreting it narrowly against yourself. Can you make a direct link between one and the other?
A blanket prohibition on soliciting any customer of the company is probably going to end up unenforceable under the new law. The restriction needs to be tied to customers the employee worked with, built relationships with, or developed through their role. A salesperson who managed accounts in the Pacific Northwest can be prohibited from soliciting those accounts. The same salesperson probably can't be prohibited from soliciting accounts in a territory they never touched.
The restriction is also capped at 18 months post-employment and is limited to solicitation, not acceptance. You can prohibit the departing employee from going after your clients. You cannot prohibit them from serving a client who comes to them independently without any outreach on their part. Courts are going to look at the substance of the restriction. Don’t expect to woo them with a clever heading.
For the agreement to hold up, you’ll need to be specific about scope and offer independent consideration if the employee is already hired.
What does an employee non-solicitation agreement protect?
Employee non-solicitation agreements prohibit a departing employee from recruiting your current employees to leave. These agreements survive the ban under HB 1155 without a time limit.
This language is easy to overlook and can do a surprising amount of damage when it’s missing.
A senior employee who leaves and takes two or three team members with them costs institutional knowledge, training investment, and organizational capacity at the same time they became a competitor. The ability to prohibit that recruitment is preserved under the new law, and for businesses building strong teams in competitive industries, it may be the most valuable post-employment restriction available.
The same consideration requirements apply: if the agreement is signed after employment begins, independent consideration is required. Scope should be limited to current employees, not former employees or candidates who were never hired.
What does a confidentiality agreement protect that the others don't?
Neither a non-solicitation agreement nor a non-compete directly protects your pricing, your processes, your client strategy, or the institutional knowledge your employees develop while working for you. That's what a confidentiality agreement is for. If you don’t have one in your standard employment agreement set, now is the time to change that.
A well-drafted confidentiality agreement can be understood by the average employee, defines what information is confidential, places specific obligations on the employee regarding use and disclosure, and survives the end of employment without a time limit tied to a specific period of restriction. Unlike a non-solicitation agreement, which restricts what someone does after they leave, a confidentiality agreement restricts what information they take with them and how they use it regardless of where they work next.
Washington has strong trade secret protections under the Uniform Trade Secrets Act, and those protections exist even without a written confidentiality agreement. But the written agreement does a few important things the statute alone doesn't: it defines specifically what your business considers confidential, it sets the tone and creates awareness in the employee that you take protecting your business seriously, and it creates a clear contractual obligation the employee acknowledged and agreed to. Clarity matters when you need to enforce it, but that tone and awareness can help ensure you don’t need to.
What should go in a confidentiality agreement for a Washington State employer? The definition should be specific enough to be meaningful without being so broad that a court treats it as overreaching.
How do the three documents work together?
The three documents cover different exposures and work best when they exist together. A client who leaves with a departing employee may be a confidentiality violation, a non-solicitation violation, or both, depending on what the departing employee communicated and to whom. Having both agreements in place gives you more than one theory of recovery and makes clear to the departing employee from the outset what the restrictions are.
The piece of this that most employers get wrong isn't the drafting. It's the rollout. New employees should sign all three before their first day. Existing employees require independent consideration for any new restrictive agreement, get all three signed in one go.
Hopefully this bit goes without saying - the agreements should be reviewed before they're needed, not after a departing employee has already called your top three clients.
- m
