In Washington, what is the minimum annualized earnings threshold for a Chem Dry franchisee's independent contractor for a noncompetition covenant to be enforceable?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
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Transfer fees are collectable to the extent that they reflect the Franchisor's reasonable estimated or actual costs in effecting a transfer.
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 seeking enforcement, when annualized, exceed $100,000 per year (an amount that will be adjusted annually for inflation). In addition, a noncompetition covenant is void and unenforceable against an independent contractor of a franchisee under RCW 49.62.030 unless the independent contractor's earnings from the party seeking enforcement, when annualized, exceed $250,000 per year (an amount that will be adjusted annually for inflation). As a res
Source: Item 22 — CONTRACTS (FDD page 68)
What This Means (2024 FDD)
According to Chem Dry's 2024 Franchise Disclosure Document, Washington state law dictates the enforceability of noncompetition covenants. Specifically, for an independent contractor of a Chem Dry franchisee, a noncompetition covenant is only enforceable if the independent contractor's annualized earnings from the franchisee exceed $250,000. This threshold is subject to annual adjustments for inflation.
This means that if a Chem Dry franchisee in Washington wants to enforce a non-compete agreement against an independent contractor, they can only do so if that contractor earns more than $250,000 annually from the Chem Dry franchise. If the contractor earns less than this amount, the non-compete agreement is considered void and unenforceable under Washington law.
This provision protects lower-earning independent contractors from being unduly restricted in their ability to work for others. It also places a significant responsibility on the Chem Dry franchisee to ensure that any non-compete agreements they use comply with these legal requirements.
Prospective Chem Dry franchisees in Washington should be aware of this earnings threshold and how it impacts their ability to protect their business interests through non-competition agreements with independent contractors. They should consult with legal counsel to ensure their agreements are compliant with current Washington state law, including any inflation adjustments to the $250,000 threshold.