The Washington Supreme Court recently limited when an employer can restrict low-wage workers from moonlighting. In David v. Freedom Vans LLC, the court ruled such agreements are presumptively invalid for low-wage workers unless they are reasonable and narrowly tailored.
Washington's Anti-Moonlighting Law
Since 2020, Washington has restricted employers from prohibiting their low-wage workers from moonlighting—having an additional job, supplementing their income by working for another employer, working as an independent contractor, or being self-employed. Low-wage workers are those earning less than twice the state's minimum wage.1
The law does not ban all anti-moonlighting agreements for low-wage workers. The statute allows three exceptions if the outside work (1) raises a safety issue, (2) interferes with the employer's "reasonable and normal scheduling expectations," or (3) alters the employee's obligations under existing law, including "the common law duty of loyalty and laws preventing conflicts of interest and any corresponding policies addressing such obligations."
Many employers rely on the third exception—the duty of loyalty exception—to prevent employees from working for competitors. This duty requires employees to act in their employer's best interest and to avoid conflicts of interest. Before Freedom Vans, no published caselaw provided guidance on how Washington's noncompete law related to this duty.
David v. Freedom Vans LLC: Case Background
Freedom Vans converts vans into adventure vehicles (#VanLife). Plaintiff Jeremy David supervised the installation of components in the vans, such as paneling, flooring, and electrical components. Plaintiff Mark Springer worked as an electrician installing electrical components in the vans. Both employees earned less than twice the minimum wage.
Freedom Vans required its employees to sign an agreement that prohibited them from "directly or indirectly engag[ing] in any business that competes" with Freedom Vans during their employment. The agreement defined "direct or indirect competition" broadly as "engaging in a business as owner, partner, or agent" or "becoming an employee of any third party that is engaged" in a "competitive business."
The two plaintiffs signed this agreement. They both claimed they had declined work opportunities to build and repair vans because of their agreements. They left the company and filed a class action, alleging the agreements they signed violated Washington's noncompete law, RCW 49.62.
Freedom Vans won summary judgment, with the trial court ruling that Washington's noncompete law does not limit an employer's right to enforce an employee's duty of loyalty and avoiding conflicts of interest. The Washington Court of Appeals affirmed, stating the anti-moonlighting law permits employers to restrict outside employment in line with this duty.
The Narrowed Duty of Loyalty Exception
The Washington Supreme Court addressed whether Freedom Vans' anti-moonlighting provisions fell within the duty of loyalty exception. It was remanded to the trial court to make that determination.
In doing so, the court held that "barring employees from providing any kind of assistance to competitors exceeds a narrow construction of the duty of loyalty." It reasoned that this narrow construction of duty of loyalty is "consistent with the economic realities animating the legislature's objective to facilitate workforce mobility, as many low-wage workers must work multiple jobs to provide for themselves and their families." The court explained that while employers may impose anti-moonlighting prohibitions consistent with the duty of loyalty, those prohibitions must be "reasonable" and narrowly construed. Reasonableness is decided on a "case-by-case" basis and considers "[1] whether there is a need to protect the employer's business or goodwill, [2] whether the restraint on the employee is reasonably necessary, and [3] whether enforcing the noncompete agreement violates public policy." The trial court must apply this reasonableness framework on remand.
Key Takeaways for Employers
Washington's anti-moonlighting law provides a private right of action for actual damages or a $5,000 penalty, whichever is greater, plus reasonable attorneys' fees and litigation costs, with the potential for a class action. Employers should review their offer letters, employment agreements, and policies to ensure any anti-moonlighting, loyalty, conflict of interest, noncompete, or other outside employment provisions are narrowly tailored as consistent with the new ruling.
Although Freedom Vans specificallyaddressed Washington's anti-moonlighting law, it suggests that a narrow interpretation of the duty of loyalty may apply to Washington's broader noncompete framework. The court noted that although the 1992 Kieburtz & Associates, Inc. v. Wren2 case held that the duty of loyalty prevents employees from directly competing and soliciting customers for rivals during their employment, that case predated RCW 49.62 and, thus, does not interpret the duty of loyalty within the context of Washington's existing noncompete law. Employers with questions about these implications should consult experienced counsel.
Footnotes
1 In 2025, the threshold is $33.32 per hour, i.e., approximately $68,000 annually (assuming 2040 hours annually).
2 68 Wn. App. 260, 842 P.2d 985 (1992).
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