Does Washington's RCW 49.62 apply to the non-compete I sign as the seller, or just to my employees?

RCW 49.62 primarily targets employee non-competes, but seller non-competes in business sale transactions are still subject to Washington court scrutiny for reasonableness. Courts will generally enforce a seller non-compete if it's tied to genuine goodwill consideration and limited in geographic scope to the markets the business actually served — typically 3 to 5 years is the standard range in Washington business sales. Blanket statewide or nationwide restrictions without clear justification are vulnerable to challenge even in the seller context.

What happens if a buyer wants my key employee to sign a non-compete but that employee earns under the income threshold?

Under RCW 49.62, non-compete agreements for employees earning below approximately $123,394 (the 2024 CPI-adjusted threshold) are void and unenforceable in Washington. This means a buyer cannot legally bind lower-wage employees with a non-compete, and any clause attempting to do so offers no real protection. Sellers should disclose this proactively to buyers rather than waiting for post-closing disputes — and buyers may need to restructure their retention strategy around non-solicitation, confidentiality agreements, or equity-based incentives instead.

Can a Washington business sale include a no-poach clause preventing me from hiring my former employees after closing?

A narrow, time-limited non-solicitation of employees clause — typically 12 to 18 months — is generally defensible in Washington business sale agreements. However, Washington's Attorney General has been aggressive about broad no-poach arrangements since 2018, when the AG's office reached settlements with over 50 franchise systems operating in the state. The practical rule: draft it narrowly to cover active recruiting of former employees, not passive hiring of workers who approach you voluntarily, and keep the duration reasonable.

Will unpaid B&O taxes show up as a problem during a Washington business sale?

Yes — unpaid Washington Business and Occupation (B&O) tax creates a state tax lien that can surface during title search in an asset sale and potentially derail closing. The Washington Department of Revenue can provide a tax compliance summary or clearance documentation, which most sophisticated buyers and their attorneys will request during due diligence. Sellers should request this document themselves during pre-sale preparation, ideally 60 to 90 days before going to market, to allow time to resolve any discrepancies.

How does Washington's Paid Family and Medical Leave program create risk in a business sale?

If a seller has misclassified workers as independent contractors or has gaps in PFML premium payments to the Washington Employment Security Department (ESD), that liability can become a negotiating point — or a deal-killer — during due diligence. Buyers with experienced M&A counsel will request ESD account records as a standard part of their employment law review. Pull your own ESD premium payment history before listing and address any classification issues with a Washington employment attorney before they surface in the buyer's due diligence report.

Does it matter whether the sale is structured as an asset sale or a stock sale for non-compete enforceability purposes?

It matters significantly. In an asset sale — the most common structure for small and mid-sized Washington businesses — employment agreements and non-competes don't transfer automatically; they must be re-executed at or before closing. This actually gives both parties a clean opportunity to draft RCW 49.62-compliant agreements from scratch. In a stock sale, existing employment agreements transfer with the entity, meaning unenforceable or non-compliant agreements become the buyer's inherited problem — which often results in price adjustments or indemnification demands once discovered.

Non-Compete & Employment Law in WA Business Sales

Why Washington Is Different — and Why It Matters for Sellers

If you're selling a business in Washington State, non-compete agreements aren't just a closing-day formality. They're a regulated legal instrument with specific enforceability thresholds, disclosure requirements, and compensation rules that directly affect your deal structure. Washington's Revised Code of Washington (RCW) 49.62, which took effect January 1, 2020, fundamentally changed how non-competes work in this state — and most business sellers haven't caught up.

Unlike states such as Florida or Texas, where non-competes are broadly enforceable with reasonable geographic and time limitations, Washington draws a hard line. Understanding where that line sits — and how it applies differently to owners versus employees — can mean the difference between a clean deal close and a renegotiation nightmare three weeks before escrow.

The Owner vs. Employee Distinction: Two Very Different Standards

Here's where many sellers get tripped up. RCW 49.62 creates separate tracks depending on who is signing the non-compete.

Non-Competes for Owners Selling a Business

When a business owner sells their company, the non-compete they sign as part of the purchase agreement is generally held to a higher standard of enforceability than employee non-competes. Courts in Washington recognize that a seller personally received substantial consideration — the sale price — in exchange for agreeing not to compete. This logic parallels how courts in states like California (which bans most employee non-competes entirely) still permit seller non-competes tied to a business sale under California Business and Professions Code Section 16601.

In Washington, a seller non-compete tied to the sale of a business is treated as a commercial contract between sophisticated parties. That means courts are more likely to enforce reasonable geographic and time restrictions if they're tied to legitimate protections of the goodwill the buyer just paid for. Typical seller non-competes in Washington business sales run 3 to 5 years, with geographic scope tied to the actual market served by the business — not a blanket statewide restriction.

Practically speaking: if you're selling a plumbing company that serves the greater Seattle metro, a non-compete restricting you from operating a competing plumbing business within King, Snohomish, and Pierce counties for four years is likely enforceable. A clause banning you from any plumbing work anywhere in Washington for 10 years is not.

Non-Competes for Key Employees — A Major Exposure Point

Here's where deals can quietly carry hidden risk. When a buyer acquires your business, they often want your key employees to sign new non-compete agreements as a condition of closing. Under RCW 49.62, those employee non-competes are only enforceable if:

The employee earns more than $100,000 per year (adjusted annually for CPI — the 2024 threshold is approximately $123,394)
The agreement is disclosed to the employee no later than the time of the formal job offer, or, if the employee is already employed, the employer provides independent consideration (not just continued employment)
The duration does not exceed 18 months — any longer requires the employer to prove by "clear and convincing evidence" that the longer period is necessary

This matters enormously in a business sale context. If a buyer wants your operations manager or head chef locked up post-closing and that employee earns under the threshold, the non-compete is void under Washington law. Buyers who don't know this may demand representations from you — as the seller — that certain agreements are enforceable, when legally they're not. Get this in front of your attorney before the letter of intent is signed.

The "No-Poach" and Non-Solicitation Question

Washington Attorney General Bob Ferguson's office has been aggressive in pursuing no-poach agreements — arrangements where businesses agree not to hire each other's employees. In 2018 and 2019, the AG reached settlements with dozens of national franchise systems operating in Washington, including fast food and retail chains, requiring them to eliminate no-poach clauses from franchise agreements. This signals how seriously Washington regulators treat restraints on worker mobility.

For sellers, this creates a practical concern: non-solicitation of employees clauses in your sale agreement may face scrutiny if they're broad enough to function like a no-poach arrangement. A narrowly drafted clause preventing you from actively recruiting your former employees for 12–18 months post-sale is generally defensible. A clause preventing you from hiring anyone who approaches you voluntarily is harder to defend.

Washington's Wage Transparency Law and Its Role in Due Diligence

Effective January 1, 2023, Washington's Equal Pay and Opportunities Act (RCW 49.58) requires employers with 15 or more employees to disclose salary ranges and a general description of benefits in all job postings. If the business you're selling has employees and has been posting jobs without salary ranges, you may have compliance exposure that shows up during buyer due diligence. Buyers — especially private equity-backed acquirers and strategic buyers with HR departments — are now specifically checking for this.

Clean up your job posting practices at least 6 months before you go to market. Document your compensation bands. This is a minor fix that can prevent major deal friction.

Washington Paid Family and Medical Leave: A Liability Sellers Overlook

Washington's Paid Family and Medical Leave (PFML) program, administered by the Washington Employment Security Department (ESD), requires premium contributions from both employers and employees. If you've misclassified workers as independent contractors or fallen behind on PFML premiums, that liability transfers with the business unless specifically addressed in the asset purchase agreement. Buyers conducting proper due diligence will request ESD compliance documentation. Have your WA ESD account records and premium payment history ready.

Washington Business Licensing and the Department of Revenue

Before closing, sellers need to ensure their Washington State Business License (administered through the Department of Revenue's Business Licensing Service) is current and that all Business and Occupation (B&O) Tax filings are up to date. Washington doesn't have a corporate income tax, but the B&O tax applies to gross receipts across most business classifications — and unpaid B&O tax creates a lien that can cloud title in an asset sale. Request a tax clearance certificate from the Washington Department of Revenue as part of your pre-sale preparation.

Structuring the Deal: Asset Sale vs. Stock Sale Implications

The majority of small and mid-sized Washington business sales are structured as asset sales, which means employment contracts, non-competes, and non-solicitation agreements don't automatically transfer — they need to be re-executed or newly drafted at closing. This is actually an opportunity: it allows the buyer to start fresh with updated, RCW 49.62-compliant agreements rather than inheriting potentially unenforceable ones. Work with a Washington-licensed business attorney to audit all existing employment agreements during the pre-sale period, typically 90–180 days before going to market.

What Sellers Should Do Before Listing

Audit all existing non-compete and non-solicitation agreements against RCW 49.62 thresholds and requirements
Verify current employees earning over the CPI-adjusted threshold are on compliant, documented agreements
Confirm job postings comply with RCW 49.58 salary range requirements if you have 15+ employees
Request a B&O tax clearance or compliance summary from the Washington Department of Revenue
Pull your ESD account history to confirm PFML premium compliance
Engage a Washington-licensed business transaction attorney — not a general practitioner — to review employment documents before the deal is shopped

Barrett Henry connects Washington business sellers with qualified, experienced local brokers through his nationwide referral network. Your broker and your attorney need to be working from the same playbook on employment law issues — deals fall apart when they're not.

Non-Compete Agreements & Employment Law in Washington State Business Sales