What is the minimum annualized earnings threshold for a Carls Jr. franchisee employee in Washington for a noncompetition covenant to be enforceable?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
y modified such that the franchisee has no obligation to indemnify, reimburse, defend, or hold harmless the franchisor or any other indemnified party for losses or liabilities to the extent that they are caused by the indemnified party's negligence, willful misconduct, strict liability, or fraud.
-
- Attorneys' Fees. If the franchise agreement or related agreements require a franchisee to reimburse the franchisor for court costs or expenses, including attorneys' fees, such provision applies only if the franchisor is the prevailing party in any judicial or arbitration proceeding.
-
- Noncompetition Covenants. Pursuant to RCW 49.62.020, a noncompetition covenant is void and unenforceable against an employee, including an employee of a franchisee, unless the employee's earnings from the party
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 75)
What This Means (2025 FDD)
According to the 2025 Carls Jr. Franchise Disclosure Document, Washington state law dictates the enforceability of noncompetition covenants for employees of franchisees. Specifically, for a noncompetition covenant to be valid against a Carls Jr. franchisee's employee in Washington, the employee's annualized earnings must exceed $100,000 per year. This threshold is subject to annual adjustments for inflation, meaning the actual required earnings may increase over time.
This provision protects lower-earning employees from being unduly restricted in their future employment opportunities. It ensures that noncompetition agreements are only applied to those employees who are highly compensated and likely possess significant confidential information or customer relationships that could harm the business if they were to work for a competitor. For a Carls Jr. franchisee in Washington, this means they cannot enforce a non-compete agreement against an employee making less than the specified amount.
It's important to note that Washington law also addresses noncompetition covenants for independent contractors. For an independent contractor of a Carls Jr. franchisee, the earnings threshold is higher: $250,000 per year, also adjusted annually for inflation. The FDD explicitly states that any provision in the franchise agreement that conflicts with these limitations is void and unenforceable in Washington. This highlights the importance of franchisees understanding and complying with Washington's specific labor laws regarding noncompetition agreements.
Carls Jr. franchisees operating in Washington should consult with legal counsel to ensure their employment agreements comply with these requirements. Failure to adhere to these regulations could result in the non-enforceability of noncompetition covenants, potentially impacting the franchisee's ability to protect their business interests.