Key Highlights
- Washington to Ban Most Noncompetes: ESHB 1155 renders nearly all noncompetition agreements void and unenforceable effective June 30, 2027. The law provides an an expanded definition that targets both traditional noncompetes and contractual workarounds, and it will apply to all covered agreements, not just those executed after the effective date.
- Narrow Path for Permissible Restrictions: Employers may still use limited nonsolicitation, confidentiality and trade secret protections, but these must be carefully tailored to comply with the law’s stricter standards.
- Immediate Action Required to Mitigate Risk: Employers should begin auditing agreements, revising templates and preparing required notices now, as the law introduces new compliance obligations and significant litigation exposure for violations.
Governor Ferguson signed ESHB 1155 on March 23, banning the use of noncompete agreements between businesses and workers. With this new law, Washington State joins the growing list of states prohibiting or sharply limiting the use of noncompetition agreements.
The Ban
The law makes all noncompetition agreements void and unenforceable once the law takes effect, which is expected to be June 30, 2027, regardless of when they were signed. The bill also broadens what qualifies as a noncompetition covenant. In addition to traditional noncompetes, the definition includes certain agreements between performers and venues or intermediaries that restrict lawful performance, as well as provisions requiring a worker to return, repay or forfeit compensation or benefits because the worker engages in a lawful business or profession. In practical terms, this means courts will closely review compensation and benefits arrangements for provisions that may function as a penalty on post-employment competition. For example, clawback terms, forfeiture-for-competition provisions in bonus or equity plans, retention payments that must be repaid only if the worker joins or starts a competing business, and similar disincentives may now be treated as noncompetition covenants if they are triggered by the worker’s decision to engage in lawful competitive work.
Permissible Activity
Some restrictions remain permissible:
- Nonsolicitation clauses are permitted but must be “narrowly construed.” Such clauses may bar solicitation of coworkers or customers the worker developed a relationship with for up to 18 months. However, nonsolicitation clauses cannot restrict a former employee accepting or doing business with customers.
- The sale of business carveout from the previous law remains intact. Specifically, a noncompetition covenant does not include one “entered into by a person purchasing or selling the goodwill of a business or otherwise acquiring or disposing of an ownership interest,” but only if the signer is dealing with an ownership interest representing 1% or more of the business.
- Confidentiality, trade secret, invention‑assignment provisions, certain sale‑of‑business covenants and limited educational‑expense repayment clauses remain valid.
The Notice Requirement
For employers that currently use noncompetes, notice is not just a formality — it’s a central compliance obligation. By October 1, 2027, employers must make reasonable efforts to provide written notice to all current and former employees and independent contractors whose noncompetition covenants would otherwise still be in effect, advising them that those covenants are void and unenforceable.
The bill does not define “reasonable efforts” to notify employees. To avoid the risks associated with that uncertainty, employers might consider documenting efforts to locate and contact workers, and immediately start identifying contracts that might be subject to this requirement.
What Employers Using Noncompetes Can Do Now
- Review of Existing Agreements:
- Review employment agreements, contractor forms, separation agreements, equity documents, bonus plans, clawback provisions and other compensation-related terms for provisions that may violate the new law.
- Review nonsolicitation clauses carefully to ensure they do not run afoul of new restrictions to create an unlawful noncompetition restriction.
- Assess any repayment or forfeiture provisions that could penalize a worker for engaging in a lawful occupation.
- Evaluate Enforcement Plans:
- Evaluate offboarding documents and talking points for language that could be inconsistent with the new statute.
- Develop training for HR, recruiting and in-house legal teams based on the law and any revisions to the company’s documents.
- Develop a Notice Plan:
- Identify affected current and former workers, confirm contact information and document reasonable efforts to deliver written notice.
Enforcement and Litigation Exposure
The bill authorizes enforcement by the attorney general and private suits by aggrieved persons. If a court or arbitrator finds a violation, the violator must pay the greater of actual damages or a $5,000 statutory penalty, plus attorneys’ fees, expenses and costs. Taken together, these remedies significantly increase litigation risk, particularly for employers using standardized agreements across large workforces or a contractor population.
Importantly, the law’s new definitions, rules, remedies and displacement provision, which makes this chapter the controlling framework over conflicting state laws governing worker competition, apply to cases filed on or after June 30, 2027, even if the underlying conduct or agreement predates that date. Proceedings already pending before then continue under the prior version of the statute.
Conclusion
Employers can begin preparing for the effective date of the new legislation now by gathering agreements, reviewing templates and building a notice process ahead of the effective date.
