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Employment-based noncompete agreements are void and unenforceable in Washington State as of June 30, 2027, under the recently passed HB1155 (the Act). The Act applies retroactively to all agreements challenged in proceedings that commence on or after June 30, 2027.
The Act defines prohibited noncompete agreements broadly, to include covenants or provisions:
- that prohibit or restrain an employee or independent contractor “from engaging in a lawful profession, trade, or business of any kind”;
- that prohibit the acceptance or transaction of business with a customer (sometimes called “no-accept” agreements); and
- that impose forfeiture for competition penalties.1
The Act does not apply to the following agreements:
- Non-solicitation agreements (however, such agreements must be limited in time to 18-months after termination and limited in scope to current or prospective clients, customers, or patients with whom the employee “established or substantially developed a direct relationship”);
- Confidentiality agreements;
- Agreements preventing the disclosure of trade secret information;
- Agreements to repay out-of-pocket education expenses, if the agreement expires within 18 months of the date the employee started employment, limits repayment to the pro rata portion of the remaining time of the 18-month period, and releases the employee from the obligation to repay if the employee terminates the employment relationship for “good cause” (defined here); and
- Agreements entered by a franchisee, subject to the franchise sale meeting certain legal requirements.
The Act also includes a sale-of-business exception, but the exception only applies if the person signing the noncompete “purchases, sells, acquires, or disposes of an ownership interest representing one percent or more of the business.”
Reminiscent of California’s recent noncompete legislation, the Act requires employers to affirmatively notify individuals about void noncompete agreements. Specifically, by October 1, 2027, employers must notify all current and former employees and independent contractors whose noncompete agreements are still effective that the noncompete provisions in those agreements are void and unenforceable.
The Act will replace Washington’s current noncompete law, which prohibits noncompete agreements for low- and middle-income workers. The current law has a threshold of $126,859 for employees and $317,147 for independent contractors.
With the Act’s passage, employers should take the following steps to ensure they are in compliance:
- Take note of which Washington-based employees have executed existing noncompete agreements and will need to receive notice by October 1, 2027;
- Consider which employees need to enter into new agreements; and
- Review and revise all existing form agreements to ensure compliance going forward.
Footnote
1. The Act also explicitly prohibits agreements that prohibit or restrain a performer from “engaging in a lawful performance” where the agreement is between the performer and the performance space or scheduling intermediary.
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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