Aaron Goldstein

On March 23, 2026, Washington’s Governor Bob Ferguson signed a law that eliminates non-compete agreements, severely restricts non-solicitation agreements, and imposes other requirements related to all Washington employees. Who is covered? This law applies to all employees in Washington, even if their employer is based elsewhere. My company is based outside Washington state, and we have only one employee there. Does the law apply to us? This law applies to all employees in Washington, even if their employer is based elsewhere. We’re a really small company, does it apply to us? Yes. The Act includes all entities employing one or more people and which has business activity in Washington. Even if the company is small, and even if it is based elsewhere. What is prohibited? The law defines a non-compete agreement to include any written or oral covenant, agreement or contract that “prohibits or restrains” a worker (employee or independent contractor) from engaging in a lawful business. The phrase is to be liberally construed against enforcement of a noncompetition covenant. The law gives several examples, including contracts that “directly or indirectly prohibits the acceptance or transaction of business with a customer,” or between performers and locations. How about retention incentive agreements or training benefits? The law expressly prohibits any threat or demand that an employee repay or return any compensation or benefit as a consequence of engaging in a lawful profession. This arguably includes stay incentives, training benefits conditioned on continued employment, and the like. There is a limited exception for educational expenses, so long as the covenant expires within 18 months of the start of employment (not the start of the educational program), it is limited to pro rata repayment and releases the obligation if the employee is separated based on “good cause” (a defined term). Are there exceptions? Yes, but narrow ones. Nonsolicitation agreements are allowed, but not if they ““directly or indirectly” prohibit the acceptance or transaction of business with a customer. This language is intentionally very broad. Restrictions on confidentiality, trade-secret protections, and sale of goodwill of a business are allowed (but then only if the person signing the covenant owns 1% or more of the business), and some franchisee agreements. What if I have an existing noncompete agreement with an employee who moves to Washington from out of state? The new law would apply to that employee and the noncompete agreement would be unenforceable. Does the law require me to do anything? Yes. By October 1, 2027, employers must make reasonable efforts to provide written notice to all current and former employees and independent contractors whose noncompetition covenant is still within its effective time period that their noncompetition covenant is void and unenforceable. When does this law start? The Act generally takes effect June 30, 2027. The written notice must be sent by October 1, 2027. What should I do now? Employers should review all noncompetition, nonsolicitation, and confidentiality agreements now to ensure either compliance or an orderly transition of agreements. This includes handbooks, policies, and other documents which could directly or indirectly impose an unlawful restraint. Employers should also begin planning for the employee notice (due on October 1, 2027). Experience in other states cautions that this process can be more complicated and time-consuming than expected.

Many Canadian employers expanding into the U.S. believe the U.S. legal presumption of at-will employment will provide them with additional protection against wrongful termination claims. Unfortunately for those employers, this belief is a trap. In Canada, employees who are terminated without cause often must be paid severance. In the U.S. however, an employer is generally not obligated to pay severance when an employee is fired without cause unless there is a contract requiring severance. The reality in the U.S. is that essentially every employee falls into an exception to the at-will employment doctrine. Wrongful termination claims in the U.S. are almost always discrimination or retaliation claims. In the former claim, the employee alleges that they were terminated due to some protected characteristic such as age, gender, or race. In the later claim, the employee alleges that they were terminated because they engaged in some protected activity, such as taking protected leave or complaining about workplace harassment. Once an employee alleges discrimination or retaliation, the presumption of at-will employment falls away and the employer must demonstrate a legitimate non-discriminatory and non-retaliatory reason for the termination, which the employee cannot show was a mere pretext. Because just about every employee is in some protected class or has recently engaged in some protected activity, U.S. employers must have a legitimate reason for the termination supported by strong documentary evidence. Otherwise, the employee gets to tell their story to a jury predisposed to rule against any employer who cannot provide a satisfying reason why they terminated that employee. And U.S. juries over the last several years have rendered several devastating verdicts, including a $366 million verdict handed down by a Texas jury in a case alleging race discrimination. As this case demonstrated, these verdicts are not limited to states with a reputation for being employee friendly such as California. Employers’ best defense against such verdicts is a strong performance management system that documents the legitimate non-discriminatory and non-retaliatory reasons for a termination. This requires documenting performance issues over time, not coming up with and documenting reasons after the fact. Even better, if an employer can show, with documentation, that they tried to help the employee be successful, but the employee lacked either the ability or the inclination to do so, it can help stop an employment claim before it can move much past the demand letter stage. Canadian companies taking on employees in the U.S. should make sure they have a firm grasp of the kinds of performance management practices that will keep them out of trouble. Relying on at-will employment alone is a recipe for disaster.

Since coming into office a little over four months ago, the Trump Administration has placed businesses on notice that it views certain actions intended to promote diversity, equity and inclusion (“DEI”) in the workplace as suspect and in violation of the anti-discrimination mandates of Title VII of the Civil Rights Act of 1964.  Employment lawyers have been busy helping their clients steer clear of and to prepare to defend against the Administration’s enforcement efforts.  At the same time, private plaintiffs have increased their own efforts to challenge DEI initiatives, which they allege illegally discriminate against majority groups.  Courts have grappled with such cases since long before the Trump Administration and have developed a body of case law that provides helpful guidance to employers seeking to comply with the law, while at the same time seeking to achieve equal employment opportunities for all workers. One important defense employers have against plaintiffs challenging DEI initiatives is to assert that the plaintiff lacks standing.  In this article, we examine the law of standing and cases addressing how standing principles apply in cases challenging DEI initiatives by private employers.  After analyzing some illustrative cases, we propose some measures employers may consider as they seek to comply with the law and defend against litigation by workers in majority groups. Title VII prohibits employment discrimination on the basis of race, color, religion, sex or national origin. 42 USC 2000e-2(a) & 2(d). The Supreme Court has long declared that Title VII’s protections apply to both majority and minority groups.  McDonald v. Santa Fe Trail Transp. Co., 427 US 273, 280 (1976). However, the Supreme Court has left the door open for affirmative action where the employer can point to a “conspicuous imbalance in traditionally segregated jobs.” See Johnson v. Transp. Agency, Santa Clara County, Cal., 480 US 616 (1987). According to opponents of DEI, the Supreme Court’s recent decision in Students for Fair Admissions v. President and Fellows of Harvard, 600 U.S. 181, 213, 143 S. Ct. 2141, 2166 (2023), narrowing the use of affirmative action in college admissions under Title VI, should apply with equal force to workplace DEI initiatives under Title VII. Opponents of DEI have been eager to litigate this position, as the number of anti-DEI lawsuits in 2024 was more than five times larger than the number in 2021. See https://advancingdei.meltzercenter.org/cases/ In many of these cases, standing has been an important defense for employers. To establish standing in federal court, a “plaintiff must demonstrate that an injury is ‘[(1)] concrete, particularized, and actual or imminent; [(2)] fairly traceable to the challenged action; and [(3)] redressable by a favorable ruling.’” Bolduc v. Amazon.com Inc., Civil Action No. 4:22-CV-00615, 2024 U.S. Dist. LEXIS 75524, at *10 (E.D. Tex. Apr. 25, 2024) (quoting Attala Cnty. v. Evans, 37 F.4th 1038, 1042 (5th Cir. 2022)). A key obstacle to standing in cases challenging DEI programs is the plaintiff’s ability to credibly allege both (1) that the plaintiff applied for some benefit, and (2) that the plaintiff was denied that benefit because of a protected characteristic such as age or gender. Bolduc v. Amazon.com Inc. illustrates the first requirement. While a plaintiff may object to a benefit being open only to a particular group, if the plaintiff did not apply for that benefit, the plaintiff does not have standing to sue in federal court. In Bolduc, the plaintiff sued under § 1981 of the Civil Rights Act of 1866, which prohibits discrimination on the basis of race, color, and ethnicity in the making and enforcement of contracts. 2024 U.S. Dist. LEXIS 75524 at *6. The United States District Court of the Eastern District of Texas assessed the plaintiff’s standing to sue over an Amazon.com program whereby “eligible Black/African American, Hispanic/Latinx, and Native American/Indigenous DSP owners receive a monetary stipend of $10,000 … [while] DSPs owned by Whites or Asian Americans … receive no such stipend.” Id. at 2. The plaintiff, who was white, claimed that this grant put her at a competitive disadvantage because she did not receive it. Id. at 8. The District Court ruled that the plaintiff did not have standing because her injuries were speculative. The plaintiff had not applied to Amazon’s DSP program and thus had not suffered an actual or imminent injury, nor had she alleged that applying to the DSP program would have been futile.  Id. at 11-13. Similarly, the Court in Correll v. Amazon.Com, Inc. dismissed a challenge to an Amazon program intended to benefit minorities because the plaintiff had not alleged that he was ready and able to take advantage of that program. No. 3:21-cv-01833 BTM, 2022 U.S. Dist. LEXIS 183736, at *6 (S.D. Cal. Oct. 6, 2022). In Correll, the plaintiff challenged Amazon “policies in place to promote, encourage, and incentivize minority certified sellers.” Id. at 2. The Court, however, dismissed the Plaintiff’s suit on standing grounds, noting that that he did not plead that the was “able and ready” to sell on Amazon’s website, and thus had no injury in fact. Id. When assessing legal risk, employers thus need to consider the number of applicants who actually applied for the benefit. If, for example, no non-African Americans applied for a program intended to benefit African American candidates, standing issues may render the overall potential liability to individual claimants relatively low. The Valencia Ag, LLC v. Reid case is a good illustration of the second requirement—that the plaintiff credibly allege that he or she was actually denied a benefit because of race, gender, or some other protected classification. In Valencia, the United States District Court for the Northern District of New York assessed the plaintiff’s standing to sue over New York’s Cannabis Law and regulations, which they claimed favored minority-owned and women-owned businesses. No. 5:24-CV-0116 (GTS/TWD), 2025 U.S. Dist. LEXIS 54706, at *1 (N.D.N.Y. Mar. 25, 2025). Like the plaintiff in Bolduc, the plaintiff in Valencia Ag argued that “social equity goals, including a goal that fifty-percent of licenses be given to SEE [Social and Economic Equity] applicants” put the plaintiff at a competitive disadvantage on the basis of race and sex. Id. 19. The plaintiff asserted that the Cannabis Law and regulations violated its rights under the Equal Protection Clause of the Fourteenth Amendment because they discriminate and grant preferential treatment to applicants on the basis of race and/or sex. Id. at *2. The Court, however, held that “a mere aspirational goal to have a certain percentage of licenses given to SEE applicants (a group that is not definitionally limited to only minority- and woman-based businesses) does not plausibly suggest an injury-in-fact.” Id. The Court noted that New York State’s goal does not require that a certain percentage of licenses be given to SEE applicants. In other words, the plaintiff had not plausibly alleged that the aspirational goals caused the plaintiff to be denied a benefit. Id. at *19. In contrast to Bolduc and Valencia Ag, LLC, Garnet v. GMC illustrates the type of case where the plaintiff has satisfied standing requirements by alleging that he or she did indeed apply for a benefit and that race, gender, or some other protected classification led the defendant to deny the plaintiff that benefit. 114 F. Supp. 2d 649, 656 (N.D. Ohio 2000). In Garnet, the benefit in question was an apprentice program open to the defendant’s existing employees. Id. at 650. Applicants were given interview and exam scores, and minority and female candidates were each given 7 extra points towards their total scores. The Court ruled that the plaintiff had alleged an injury in fact and thus standing to sue because “but for the addition of seven points to the scores of [other applicants] the Plaintiff would have been selected … .” Id. at 656. The Court ultimately dismissed the plaintiff’s case on other grounds.[1] As the Bolduc and Garnet cases illustrate, programs with aspirational goals rather than quotas or point systems are going to be far more difficult to challenge given the plaintiff’s inability to show that they were denied a benefit because of race, gender, or other protected classification. State courts, like federal courts, have their own standing requirements, which usually require an employee to allege an injury in fact and that the plaintiff would actually receive a benefit from the relief requested. In Washington state, for example, a party has standing to sue if he or she demonstrates a present substantial interest in the subject of the lawsuit, not a mere expectancy or future contingent interest, and demonstrates that he or she will obtain a benefit from the relief requested. Primark, Inc. v. Burien Gardens Assocs., 63 Wn. App. 900, 907, 823 P.2d 1116 (1992). Put another way, to have standing, a party must have a distinct and personal interest in the outcome of the case. Pac. Marine Ins. Co. v. Dep't of Revenue, 181 Wn. App. 730, 740, 329 P.3d 101 (2014); Erection Co. v. Dep't of Lab. & Indus., 65 Wn. App. 461, 467, 828 P.2d 657 (1992). A party who did not apply for a particular program will have difficulty making such a showing. These cases contain some lessons for employers assessing the risk of their DEI programs. First, programs with aspirational goals rather than quotas are less risky insofar as the plaintiff will have a difficult time showing that they were denied a benefit because of race, gender, or some other protected class. Second, employers should avoid programs that provide a clear numerical advantage to applicants (for jobs or for company programs) on the basis of race, gender or other protected class. Finally, employers will have defenses where no candidates outside of the preferred category apply. For example, if no white candidates apply to an internship designed to benefit minority candidates, there will be no individuals with a clear basis for standing to bring suit. Accordingly, employers will face less risk if they actively market such a program towards minority candidates, but accept applications from all otherwise qualified candidates and do not discriminate among applicants on the basis of race, gender, or other protected class. [1] The Sixth Circuit Court of Appeals has held that plaintiffs alleging “reverse discrimination” must make a showing that “background circumstances support the suspicion that the defendant is that unusual employer who discriminates against the majority.” Pierce v. Commonwealth Life Ins. Co., 40 F.3d 796, 801 (6th Cir. 1994). Following this precedent, the Court in Garnet held that there was no proof that the Defendant discriminated against white males in general, and thus the plaintiff had failed to make the required showing. Whether this additional element should be included in “reverse discrimination” cases is currently on appeal before the U.S. Supreme Court.  Ames v. Ohio Dep't of Youth Servs., 145 S. Ct. 118 (2024) (cert granted). Reprinted with permission from the June 3, 2025 edition of the New York Law Journal  © 2024 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or asset-and-logo-licensing@alm.com.