Washington’s Noncompete Ban Is Coming. Health Care Employers Should Start Panicking (Just A Little).

Seyfarth Synopsis: Washington’s health care employers have spent years navigating tighter and tighter restrictions on noncompetes—but under HB 1155, the state has decided to largely eliminate them altogether. Beginning June 30, 2027, physician and provider noncompetes will be largely void, and the law may extend far beyond traditional restrictive covenants to scrutinize compensation terms that penalize employee mobility. The real challenge for health care organizations is no longer how to enforce a noncompete—it’s how to retain physicians, protect competitive interests, and manage patient transitions in a world where provider mobility is the rule, not the exception.

Washington health care employers have spent years living in an increasingly restrictive noncompete environment. First came salary thresholds. Then disclosure requirements. Then additional restrictions on nonsolicitation agreements. Then the courts got involved.

Apparently, after years of tinkering with noncompete regulations, the legislature concluded the experiment had failed—not because the restrictions were insufficient, but because employers continued to have noncompetes at all.

Beginning June 30, 2027, Washington’s new noncompete law will effectively eliminate nearly all employment-related noncompetition agreements, including for physicians, and advanced practice providers.

Olympia’s message could not be much clearer: employers should retain physicians by giving them reasons to stay, not by making it harder to leave.

And while 2027 may sound comfortably far away, health care organizations should start preparing now. Because when the law takes effect, physician noncompetes won’t merely become harder to enforce. They’ll become illegal.

The Noncompete Era Is Ending

For years, Washington treated noncompetes like an aging treatment protocol—still technically available, but subject to so many warnings, limitations, and second thoughts that its long-term prognosis was never particularly encouraging.

HB 1155 takes a different approach.

Instead of asking whether a noncompete is reasonable, adequately disclosed, properly limited in scope, tied to sufficient compensation, and supported by a legitimate business interest, the legislature decided to skip the analysis entirely.

The legislature’s new approach can be summarized in a single, legally sophisticated word: No.

Existing noncompetes? Void.

Future noncompetes? Void.

Threatening to enforce one? Problematic.

Telling a physician or a provider they are still bound by one? Also problematic.

Beginning June 30, 2027:

• Existing and future noncompetition covenants will be void.
• Employers may not enforce or attempt to enforce noncompetes.
• Employers may not threaten to enforce noncompetes.
• Employers may not represent that a worker remains bound by a noncompete.
• Violations may trigger statutory penalties, attorney fees, and enforcement actions by both private parties and the Washington Attorney General.

The law doesn’t merely regulate restrictive covenants. It largely prohibits their use all together.

Why Health care Have the Most to Lose

Let’s be honest: health care employers did not maintain physician and provider noncompetes because they enjoyed paying lawyers to litigate them or relished the occasional courtroom battle. They maintained them because the prospect of enforcement often kept physicians from testing the market in the first place and helped protect the substantial investments employers make in recruiting, onboarding, and integrating providers into their organizations.

Recruiting providers is expensive. Very expensive. By the time a physician or a provider is recruited, licensed, credentialed, onboarded, marketed to the community, integrated into referral networks, and finally seeing patients at full volume, the organization has often made a substantial investment.

Yet the concern was never just about recovering recruiting costs. A departing physician or physician can affect far more than a balance sheet. Health care employers have long worried about disruptions to continuity of care, erosion of referral relationships, coverage and call-schedule gaps, competition for scarce specialties, and the loss of patient relationships that take years to develop.

Historically, a restrictive covenant helped protect at least all if not some of those interests.

Beginning in 2027, the response to “We’re concerned that Dr. Bailey may join the practice across the street” can no longer be, “Let’s look at the noncompete.”

The better question becomes:

“Why would Dr. Bailey stay in the first place?”

That may sound like the sort of thing someone posts on LinkedIn immediately before announcing a leadership retreat. But health care employers that continue relying on contractual restrictions as their primary retention strategy may find themselves operating with a playbook that no longer exists.

The Most Consequential Part of the Law May Not Be the Noncompete Ban

If all HB 1155 did was eliminate geographic noncompetes, health care employers would have a fairly straightforward drafting exercise ahead of them.

Unfortunately, the statute appears to have bigger ambitions.

One of the more interesting features of the new law is that it may reach provisions that aren’t labeled “noncompetes” at all. The statute’s definition of a noncompetition covenant includes provisions requiring a worker to repay, return, or forfeit compensation as a consequence of engaging in lawful competitive employment (whatever that means).

This may place portions of physician and provider compensation arrangements under increased scrutiny. Health care employers should pay particular attention to compensation structures that were historically designed to protect recruiting and onboarding investments but may act as a constraint on mobility.

Certain repayment obligations, forfeiture provisions, retention incentives, equity arrangements, and compensation structures may face scrutiny if they effectively penalize a provider for leaving and joining a competitor.

In other words, calling something a “retention incentive” does not necessarily make it a retention incentive. Much like calling a donut a wellness program does not make it healthy.

Health care employers should take a close look at:

• Sign-on bonuses.
• Retention bonuses.
• Forgivable loans.
• Equity programs.
• Deferred compensation arrangements.
• Clawback provisions.
• Physician recruiting packages.

Because the question regulators and courts may ask is not, “What did you call this provision?” The question may be, “What does it actually do?” As every health care compliance officer knows, regulators tend to be stubbornly interested in substance over labels.

The Biggest Wild Card? Patients Have a Vote.

Many physician and provider agreements historically assumed that when a physician leaves, the patients stay.

Patients do not always cooperate. Patients have a habit of making their own decisions.

The new law continues to permit carefully drafted patient nonsolicitation provisions. But health care employers should pay close attention to the distinction between soliciting patients and treating patients. Many physician agreements go beyond prohibiting active solicitation and instead prohibit treatment of former patients altogether.

Those are not necessarily the same thing.

The new law expressly distinguishes between soliciting a patient and accepting business from a patient. Restrictions that directly or indirectly prevent a provider from accepting or treating a patient who independently seeks out the provider may be vulnerable if they function as restraints on competition rather than true nonsolicitation provisions.

A restriction that prevents Dr. Bailey from actively raiding a patient panel may survive.

A restriction that effectively prevents patients from continuing to see Dr. Bailey after they independently decide to follow her may face a much tougher road.

The law’s underlying theme is that employee mobility matters. But so does patient choice.

In a World Without Noncompete, Confidentiality Agreements May Become the Strongest Medicine Available.

If noncompetes were your first line of defense, confidentiality agreements and trade secret protections are about to get promoted from the waiting room to the operating room. Provider mobility is the new reality. Information mobility does not have to be

Patient-facing businesses often possess valuable proprietary information, including referral data, strategic planning materials, payer contracting information, compensation models, operational metrics, and business development strategies. In a post-noncompete world, that information may become one of the organization’s most important vital signs.

The practical question is not whether confidential information exists. It almost certainly does. The real question is whether the organization has taken the steps necessary to diagnose, document, and protect it as confidential information. Think less about who walks out the door and more about what walks out with them

Employers should evaluate whether they have:

• Updated confidentiality agreements.
• Appropriate trade secret protections.
• Role-based access controls.
• Electronic monitoring and auditing capabilities.
• Secure offboarding procedures.
• Effective documentation of proprietary business information.

In other words, health care employers may need to spend less time writing restrictive covenants and more time strengthening their information hygiene. After all, courts are far more likely to prescribe relief when an employer can clearly identify and protect a trade secret than when it simply complains that valuable employees changed practices.

Confidentiality agreements and trade secret protections remain fully enforceable under the amended statute and will likely become among the most important tools available to health care employers after 2027. As noncompetes are discharged from active duty, trade secret protections may find themselves serving as the new chief resident of the employer-protection ward.

Seven Things to Do Before June 2027

The clock is ticking. The period before June 30, 2027 is for thorough preparation, not procrastination.

1. Identify Every Restrictive Covenant—Especially the Ones Hiding in Plain Sight

Review:

• Physician employment agreements.
• APP agreements.
• Medical director agreements.
• Independent contractor agreements.
• Equity and incentive plans.
• Practice acquisition agreements.
• Compensation and retention programs.

Do not limit the review to provisions expressly labeled “noncompete.”

2. Create a Notice Compliance Plan

The law requires employers to make reasonable efforts to notify current and former workers whose covered restrictions remain in effect that those provisions are void and unenforceable by October 1, 2027.

Health care employers should begin identifying affected physicians, providers, and contractors now rather than attempting to reconstruct records later.

3. Reevaluate Compensation Programs

Assess whether compensation provisions could be characterized as:

• Forfeiture-for-competition provisions.
• Stay-or-pay arrangements.
• Repayment obligations triggered by competitive employment.
• Competitive-employment clawbacks.

Particular attention should be paid to physician incentive compensation, equity arrangements, retention bonuses, and recruiting incentives.

4. Redesign Provider Retention Strategies

Health care employers that previously relied on restrictive covenants should focus on retention rather than restriction. Because “people stay here because they have to” is not a long-term workforce strategy.

Instead, try:

• Leadership opportunities.
• Partnership pathways.
• Professional development.
• Competitive compensation.
• Scheduling flexibility.
• Physician engagement initiatives.

5. Strengthen Existing Alternatives

As existing physician and provider agreements come up for renewal, health care employers have a natural opportunity to reassess their post-noncompete strategy. Rather than simply recycling legacy restrictive covenants, employers should evaluate whether their agreements appropriately emphasize the protections that remain fully enforceable and are likely to become increasingly important after 2027.

Ensure agreements contain enforceable:

• Confidentiality protections.
• Trade secret protections.
• Employee nonsolicitation provisions.
• Patient nonsolicitation provisions tailored to the statute’s narrower requirements.

6. Develop Patient Transition Protocols

Organizations that proactively manage provider departures will be better positioned than those attempting to address patient transition issues after a physician has already left.

Establish lawful procedures governing:

• Patient communications.
• Medical record transfers.
• Continuity-of-care planning.
• Departing provider announcements.
• Referral management.

7. Multi-State Health care Systems Beware

Health care organizations operating across multiple states should not assume they can solve this problem through a different governing-law clause. Washington continues to take an exceptionally aggressive approach to protecting Washington-based workers from out-of-state noncompete enforcement.

The Real Takeaway

The biggest mistake health care employers can make is viewing HB 1155 as simply a noncompete problem.

It’s a retention problem.

It’s a recruiting problem.

It’s a compensation-design problem.

It’s a patient-transition problem.

And, for many organizations, it’s a culture problem.

It will take the village to address.

For years, restrictive covenants functioned as a safety net. Beginning in 2027, that safety net largely disappears.

Health care organizations that thrive won’t be the ones finding clever new ways to recreate noncompetes under a different name.

They’ll be the organizations that become places physicians and providers actually want to stay.

Which, admittedly, is much harder than drafting a restrictive covenant.

It is also considerably more enforceable.

And unlike a noncompete, it doesn’t become void on June 30, 2027.

The legislature already took care of that for you.