AN ACT Relating to the calculation of compensation of an employee of a medical school and an affiliated faculty group practice for purposes of a noncompetition agreement; amending RCW 49.62.010; adding a new section to chapter 49.62 RCW; and creating a new section.

NEW SECTION. Sec. 1. The legislature reaffirms that workforce mobility is important to economic growth and development and that agreements limiting competition or hiring may be contracts of adhesion that may be unreasonable as it did originally with passage of Engrossed Substitute House Bill No. 1450 in 2019. In advancing these findings, the legislature must promote equitable application and enforcement of the standards under chapter 49.62 RCW. The legislature also finds that employers should seek to use alternative means where possible to avoid agreements that limit competition or utilize unreasonable contracts of adhesion.

(1) "Earnings" means the compensation reflected on box one of the employee's United States internal revenue service form W-2 that is paid to an employee over the prior year, or portion thereof for which the employee was employed, annualized and calculated as of the earlier of the date enforcement of the noncompetition covenant is sought or the date of separation from employment. For employees who receive compensation from both a medical school and an affiliated faculty group practice, when such affiliation was initially established prior to January 1, 2020, "earnings" include the combined compensation from each entity. "Earnings" also means payments reported on internal revenue service form 1099-MISC for independent contractors.

(4) "Noncompetition covenant" includes every written or oral covenant, agreement, or contract by which an employee or independent contractor is prohibited or restrained from engaging in a lawful profession, trade, or business of any kind. A "noncompetition covenant" does not include: (a) A nonsolicitation agreement; (b) a confidentiality agreement; (c) a covenant prohibiting use or disclosure of trade secrets or inventions; (d) a covenant entered into by a person purchasing or selling the goodwill of a business or otherwise acquiring or disposing of an ownership interest; or (e) a covenant entered into by a franchisee when the franchise sale complies with RCW 19.100.020(1).

(5) "Nonsolicitation agreement" means an agreement between an employer and employee that prohibits solicitation by an employee, upon termination of employment: (a) Of any employee of the employer to leave the employer; or (b) of any customer of the employer to cease or reduce the extent to which it is doing business with the employer.

(6) "Party seeking enforcement" means the named plaintiff or claimant in a proceeding to enforce a noncompetition covenant or the defendant in an action for declaratory relief.

An employer of employees who receive compensation from both a medical school and an affiliated faculty group practice, when such affiliation was initially established prior to January 1, 2020, must report annually to the department of labor and industries the number of employees who are and who are not subject to the standards of this chapter based on the combined compensation from each entity as provided in the definition of "earnings" provided in RCW 49.62.010. This report shall include the medical school department under which these employees perform their work.