Washington Supreme Court Indicates Agreements Prohibiting Employees from Working for Competitors During Employment May Violate State Law

On January 23, 2025, the Washington Supreme Court held that two Washington workers can argue that their former employer imposed unreasonable restrictions in violation of a state statute regulating non-compete agreements that prohibit low-wage workers from moonlighting, or otherwise working for another employer during their employment.

The opinion in David v. Freedom Vans LLC, No. 102566-1, 2025 BL 20748 (Wash. Jan. 23, 2025) takes a broad reading of the state statute for low-wage workers who make less than twice the state minimum wage, currently $33.32 an hour in Washington, potentially invalidating customary restrictions in employment agreements and narrowing the duty of loyalty. Though it is limited to Washington, this interpretation could have broader implications for other states with low‑wage workers or non-competition laws. The court in this case looked to legislative intent toward broad employee protections, particularly for low-wage employees, and for the duty of loyalty between employers and employees to be construed narrowly to further that goal. The court concluded that the reasonableness of a non-compete and duty of loyalty restrictions are decided on a case-by-case basis, making it difficult to formulate a clear standard for companies to follow. It remains to be seen how the court will evaluate the reasonableness of this particular non-compete, as the opinion remanded the case to the superior court for the workers to challenge the non-compete. In the meantime, companies should review their non-competes and other restrictions on worker mobility in light of this opinion.

Case Background

Freedom Vans LLC is a company that converts vans into mobile homes. The company hired Jeremy David and Mark Springer for construction and automotive mechanic work, respectively. Freedom Vans required all employees to sign a non-compete agreement prohibiting employees from engaging in any business that competed with the company during their employment, a typical restriction often imposed on employees.

David and Springer both left the company in 2021 and, in 2022, filed suit individually and on behalf of a class of similarly situated individuals against the company. The workers alleged that the non-compete agreement was in violation of a state statute regulating non‑compete agreements and that they had passed on lucrative work because of the alleged illegal provision. Specifically, plaintiffs “claimed they declined offers to take on additional work building or repairing vehicles after signing the agreement because they were worried that if they accepted these side jobs, Freedom Vans would terminate their employment and potentially pursue legal action.” Both David and Springer were considered low-wage workers under the relevant state statute, having never made more than twice the minimum wage while working for Freedom Vans.

The state law included an exception allowing non-compete agreements that considered the obligations of an employee to an employer, such as the common law duty of loyalty. Freedom Vans argued that it met this exception. The superior court granted summary judgment to Freedom Vans but denied their request for attorneys’ fees, with the Court of Appeals affirming on both issues.

The Washington Supreme Court reversed, holding that Freedom Vans’ view of the duty of loyalty was too broad and that restricting employees from assisting competitors, even during employment, may frustrate the legislator’s intent to protect low-wage workers. The court concluded that the state “broadly protect[s] employees who earn less than twice the state minimum wage from unreasonable restrictions on obtaining supplemental employment and to narrowly permit employers to impose restrictions consistent with the common law duty of loyalty.” David v. Freedom Vans LLC, No. 102566-1, 2025 BL 20748, at *7 (Wash. Jan. 23, 2025).

The case has been remanded to the superior court to decide the issue of whether the non‑compete agreement is reasonable and enforceable under the state statute and to determine damages and attorneys’ fees.

What Should Companies Do Now?

Companies with employees based in Washington should review their non-competes in light of this ruling. This is especially true for employers with non-competes or policies restricting low-wage workers from working for other companies during their employment.

Although this case is limited to Washington, other courts could have similar interpretations of their state low-wage-workers laws or more comprehensive non-compete laws. Many employers impose restrictions like the one found in the Freedom Vans’ non-compete agreement, prohibiting employees from working for competitors during employment. These provisions are even common in California and other states that outright prohibit employment-based non‑compete agreements.

As with any case, the factual context is important to keep in mind when considering the potential applicability to other situations. Among other things, plaintiffs here were low‑wage workers who were unable to work side jobs such as building or repairing vehicles. The company did not appear to allege that plaintiffs’ work involved trade secrets or confidential business information concerns. With that said, it bears watching the extent to which the court’s evaluation of the duty of loyalty on a case-by-case basis might be adopted in other circumstances.

Companies should, with the assistance of employment counsel, review and assess their non-compete agreements to evaluate how they measure up to relevant state statutes, particularly regarding low-wage employees. Companies with employees in states with similar employee protections to Washington, like California, Illinois, Maine, Maryland, Massachusetts, Nevada, Oregon, Rhode Island, and Virginia, should be particularly vigilant in reviewing their non-competes.