State of Washington Law Bans Nearly All Noncompete Pacts

On March 23, Washington Gov. Bob Ferguson signed Engrossed Substitute House Bill 1155, which bans nearly all noncompete agreements for employees and independent contractors in the state, effective June 30, 2027.

Washington became the seventh state with a comprehensive ban on noncompetes, joining California, Minnesota, Montana, North Dakota, Oklahoma and Wyoming. Eight other states (Colorado, Illinois, Maine, Maryland, New Hampshire, Oregon, Rhode Island and Virginia) and Washington, D.C., significantly restrict them, with legislation primarily focused on income thresholds.

The new law in Washington:

• Builds on a 2019 state law that limited noncompete agreements to workers earning more than $100,000 (updated in 2024 to $120,559,99 for workers and $301,399.98 for independent contractors).
• Applies to noncompetes signed before or after June 30, 2027.
• Declares almost all current and future noncompetition covenants void and unenforceable.
• Covers any written or oral agreement that prohibits or restrains an employee or independent contractor from engaging in a lawful profession, trade or business.
• Requires employers to provide written notice to workers by Oct. 1, 2027, informing them their old noncompete agreements are no longer enforceable.
• Voids agreements with employees and independent contractors that restrict them from working in their field after leaving a position.
• Prohibits employers from enforcing, threatening or even suggesting a noncompete applies to the employment relationship.
• Prevents “stay or pay” restrictions that require workers to pay back training costs or bonuses if they leave, with narrow exceptions for education expenses. 
• Stipulates that violations can trigger lawsuits, with penalties of $5,000 or actual damages, plus attorney fees.
• Does not affect agreements that protect confidential information, trade secrets or inventions.
• Does not apply to “sale-of-business” agreements (where an individual sells or acquires at least 1% of a company), certain franchisee transactions and certain narrowly drafted nonsolicitation agreements.

Next Steps

Law firms are advising employers in the state of Washington to:

• Examine their current employment covenants (as well as related offer letters, contractor agreements, etc.) to pinpoint whether any stated provisions/stipulations may qualify as a noncompete under the new law’s definition.
• Work with internal or external legal counsel to understand whether the organization’s legitimate (under the new law) confidentiality/trade secrets agreements and finite nonsolicitation pacts adequately cover their legitimate business interests.
• Start formulating notification plans for current and former employees/contractors, since employers must “make reasonable efforts to provide written notice” by Oct. 1, 2027.

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