Washington State Bans Non-Compete Agreements

Highlights

• Washington's governor signed Engrossed Substitute House Bill 1155, effective June 30, 2027, which bans virtually all non-compete agreements between companies and employees and independent contractors.
• By October 1, 2027, employers must send written notice to employees or contractors subject to non-competes alerting them that the non-compete is void and unenforceable.
• Non-solicitation agreements and non-compete agreements entered into in conjunction with the sale of a business are still enforceable, subject to the new law's requirements.

Washington now joins a small but growing number of states that have declared non-competition covenants void and unenforceable. On March 23, 2026, Washington Gov. Bob Ferguson signed into law Engrossed Substitute House Bill 1155 (SB 1155), which effectively bans non-compete agreements for virtually all employees and independent contractors in Washington state. The law takes effect on June 30, 2027.

This is a major change. Though Washington previously restricted non-competes for lower-wage workers under a 2019 law, the legislature found that those earlier reforms "did not go far enough." SB 1155 eliminates the old wage-threshold approach entirely and declares that virtually all non-compete agreements are void and unenforceable, regardless of when they were signed.

What Counts as a "Non-Compete"

The law defines a non-compete broadly. It covers any written or oral agreement that prohibits or restrains an employee or independent contractor from engaging in a lawful profession, trade or business. It also specifically includes agreements that prohibit a worker from accepting or transacting business with a customer, as well as any agreement that requires a worker to return, repay or forfeit compensation or benefits as a penalty for engaging in a lawful profession, trade or business.

What Is Still Allowed

The law does not prohibit every type of restrictive agreement. The following remain permissible:

• Non-Solicitation Agreements. Non-solicitation agreements remain enforceable in limited circumstances. Employers may enter into non-solicitation agreements with employees that prevent the departing employee from actively soliciting the employer's current employees to leave or soliciting current or prospective customers, patients or clients to shift their business away from the employer. However, customer non-solicitation agreements are permitted only where the employee established or substantially developed a direct relationship with the customer through their work. Additionally, the restriction must expire no later than 18 months after the employee's departure. Importantly, any agreement that directly or indirectly prohibits a worker from accepting business from a customer is treated as a non-compete, not a non-solicitation agreement. SB 1155 expands the definition of non-solicitation agreement from the prior law, which applied only to current customers. SB 1155 has added "prospective" to the definition.
• Confidentiality and Trade Secret Agreements. Agreements that protect confidential information, trade secrets or inventions are not affected by the ban.
• Sale of Business Agreements. A non-compete entered into in connection with the purchase or sale of a business remains enforceable, but only if the person signing the agreement is buying, selling, or otherwise acquiring or disposing of an ownership interest representing 1 percent or more of the business.
• Franchise Agreements. A non-compete entered into by a franchisee in connection with a franchise sale that complies with applicable franchise law is still permitted.
• Educational Expense Repayment Agreements. Employers may still require employees to repay out-of-pocket educational expenses, provided the agreement expires within 18 months of the employee's start date, limits repayment to a pro rata portion of the remaining time in that 18-month period and releases the employee from the repayment obligation if the employee separates for "good cause."

Requirements for Employers

Starting on the effective date, employers are prohibited from enforcing, attempting to enforce or threatening to enforce any non-compete agreement against an employee or worker. Employers also may not represent to a worker that the worker is subject to a non-compete or enter into, or attempt to enter into, a new non-compete.

In addition, by October 1, 2027, employers must make reasonable efforts to provide written notice to all current and former employees and independent contractors whose non-compete agreement is still within its stated time period, informing them that their non-compete is void and unenforceable.

Consequences of Violating the Law

If a court or arbitrator determines that an employer has violated the law, the employer must pay the affected worker the greater of his or her actual damages or a statutory penalty of $5,000, plus reasonable attorneys' fees, expenses and costs. The law includes a private right of action but also notes that the Washington attorney general may bring enforcement actions on behalf of affected workers.

Existing Non-Competes

The law applies retroactively in a significant way: All existing non-compete agreements are void and unenforceable as of the effective date, regardless of when they were signed. However, legal proceedings that were already filed before the effective date will be governed by the prior version of the law.

Next Steps for Employers

Although the law does not take effect until June 30, 2027, employers should begin preparing now. It is recommended that employers:

• review all current employment agreements, offer letters and contractor agreements to identify any provisions that may qualify as a non-compete under the law's broad definition
• consider whether existing protections such as confidentiality agreements, trade secret protections and narrowly tailored non-solicitation agreements adequately protect the company's legitimate business interests within the bounds of the new law
• plan to send written notices to current and former employees and contractors by October 1, 2027

Even though this law does not take effect until June 30, 2027, because employers must send written notification to all employees and contractors subject to an active non-competition covenant by October 1, 2027 (regardless of when it was signed), employers may want to consider implementing changes to their non-competition practices prior to June 30, 2027. Failure to send out written notice will be considered a violation of the law, potentially subjecting employers to the penalties outlined above.

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.