Freedom Vans Is Still Driving New Moonlighting Litigation in Washington

A growing wave of class actions is testing whether routine employment policies can trigger liability under Washington’s Noncompetition Covenants Act. Plaintiffs' position is that compliance depends not just on what these provisions say, but also on how they are communicated to employees. Previous class actions challenged the substance of everyday workplace policies related to conflicts of interest, outside-employment, confidentiality, and moonlighting. The new lawsuits argue that employers either failed to disclose these provisions before hire or, if they were introduced later, failed to provide employees anything in exchange for the new restrictions. As a result, common onboarding and handbook provisions are increasingly becoming targets of class action litigation.

How We Got Here

For more information on the landmark case David v. Freedom Vans LLC, see our previous update and presentation materials here.

In Freedom Vans, the Washington Supreme Court considered an agreement prohibiting employees from “directly or indirectly” engaging “in any business that competes” with the employer. The Court held that restrictions on outside employment with competitors may be enforceable if they are reasonable under the circumstances.

Since that decision, Washington employers have faced class actions challenging language in employee handbooks, codes of conduct, confidentiality provisions, conflict-of-interest policies, and stand-alone agreements. Even when not labeled as such, plaintiffs frequently characterize these provisions as unlawful noncompetition or moonlighting restrictions that unreasonably restrain employee mobility.

The New Disclosure Theory

In the last week, a plaintiff’s firm that participated in Freedom Vans filed over 30 putative class actions against Washington employers under the Washington Noncompetition Act. The new class actions focus on when and how employers disclosed the challenged provisions.

Plaintiffs allege that certain handbook provisions, workplace policies, or agreements qualify as noncompetition covenants but were not provided in writing until after employees accepted their offers of employment. They contend that:

• The provisions should have been disclosed in writing at or before acceptance of employment; and
• The delayed disclosure was unfair or deceptive because employees accepted employment without knowing about alleged restrictions on secondary employment or future economic activity.

When these same provisions were introduced after employment had already begun, plaintiffs argue they were not supported by independent consideration. The complaints allege that employers imposed new restrictions on existing employees without providing any separate benefit in exchange, such as a raise, bonus, promotion, equity award, or other meaningful consideration.

The Claimed Exposure

Plaintiffs allege economic and noneconomic injuries, including lost income opportunities, reduced bargaining power, diminished career mobility, wage suppression, reduced earning capacity, increased unemployment risk, and informational injury. These lawsuits seek:

• Certification of proposed classes;
• Actual damages or statutory damages of $5,000, whichever is greater, for each alleged violation of RCW 49.62.020 (i.e., $5,000 per putative class member);
• Treble actual damages of $25,000, subject to the applicable statutory cap, for alleged Consumer Protection Act violations;
• Attorneys’ fees, costs, and interest; and other relief.

Importantly, these lawsuits assert that some claims may reach back six years under a contract statute-of-limitations theory. Employers are likely to dispute that position.

Looking Ahead

With this new wave of lawsuits, Washington employers should review any policy or agreement addressing:

• Outside or secondary employment;
• Employment with competitors;
• Conflicts of interest;
• Employee loyalty;
• Confidentiality and proprietary information;
• Notice or approval of outside work;
• Scheduling or performance conflicts; or
• Post-employment restrictions.

That review should extend beyond documents labeled “noncompetition agreements.” Employers should examine offer letters, employee handbooks, codes of conduct, onboarding materials, electronic acknowledgments, and historical policy versions.

The Bottom Line

The latest lawsuits show that post-Freedom Vans litigation is evolving at a rapid pace. Plaintiffs are challenging not only what employment policies say, but also when and how employers disclose them.

Washington employers should review both the substance and timing of potentially restrictive policies. A privileged audit of offer materials, onboarding practices, handbook language, acknowledgments, and historical policy versions may help identify and address potential exposure.