Key Takeaways
- Noncompete agreements will be broadly prohibited for Washington‑based workers, regardless of compensation level.
- The ban applies retroactively, rendering existing noncompetes void and unenforceable as of the effective date.
- By Oct. 1, 2027, employers must affirmatively notify current and former workers that their noncompetes are no longer enforceable.
- Limited sale‑of‑business and narrow nonsolicitation exceptions remain.
- Violations carry statutory damages, attorneys fees and enforcement risk even for attempted use of banned provisions.
Washington State has enacted legislation that will eliminate nearly all noncompete agreements for employees and independent contractors, significantly expanding the state’s already restrictive approach to post‑employment restraints. Gov. Bob Ferguson signed House Bill 1155 (the Bill) into law on March 23. The law takes effect on June 30, 2027, with mandatory employer notice obligations to follow. As a result, Washington joins a small number of states that have banned, with limited exceptions, covenants not to compete.
What is banned?
Under the Bill, effective June 30, 2027, employers are prohibited from enforcing, attempting to enforce or threatening to enforce any covenant not to compete, which includes representing to employees that they are subject to a covenant not to compete or entering into or attempting to enter into a covenant not to compete. As a result, the Bill retroactively applies to covenants not to compete entered into prior to the effective date, with an exception for any legal proceeding filed before June 30, 2027.
Covenants not to compete include oral or written covenants, agreements or contracts that:
- Prohibit or restrain an employee or an independent contractor from engaging in a lawful profession, trade or business
- Directly or indirectly prohibit the acceptance or transaction of business with a customer
- Threaten, demand, require or otherwise cause an individual to return, repay or forfeit any right, benefit or compensation as a consequence of engaging in a lawful profession, trade or business of any kind
- Prohibit or restrain a performer from engaging in a lawful performance, such as between a performer and a performance space or a third party scheduling the performer for a performance space.
What is still permitted?
While the Bill bans covenants not to compete, it explicitly excludes nonsolicitation agreements prohibiting solicitation of employees, current customers, prospective customers, patients or clients for 18 months following termination of employment; confidentiality agreements; nondisclosure of trade secrets or inventions agreements; covenants not to compete entered into by a franchisee in connection with a franchise sale under RCW 19.100.020(1); or sale-of-business covenants, provided that the person signing the covenant purchases, sells, acquires or disposes of an ownership interest representing 1 percent or more of the business.
Written repayment agreements for out-of-pocket education expenses are also excluded if the agreement (1) expires within 18 months of the employee’s start date; (2) limits repayment to a pro rata portion of the remaining time of the 18-month period; and (3) releases the repayment obligation if the employee’s separation is based on “good cause” as defined by RCW 50.20.050.
What is required?
Employers must make reasonable efforts to provide written notice to all current and former employees and independent contractors whose covenants not to compete are still effective as of June 30, 2027, that the covenants are void and unenforceable. The notice must be provided by no later than Oct. 1, 2027.
What can happen?
A “person” who violates the Bill, including the notice provision, must pay the aggrieved individual the greater of their actual damages or a statutory penalty of $5,000, plus reasonable attorneys’ fees, expenses and costs. A cause of action may be brought by the aggrieved person or an attorney general to pursue any and all relief afforded.
What is next?
While the effective date is more than a year away, employers should consider reviewing their restrictive covenant agreements and identifying all affected current and former employees before the June 30, 2027 deadline. Employers not only need to prepare to timely provide the required notice but also should consider whether their existing protections, including any provisions for nonsolicitation of customers, are narrowly and properly tailored to comply with the Bill and to protect the employer’s interests.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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