Deciding it had seen enough data suggesting that noncompete restrictions (also known as “noncompetes”) are bad for innovation, entrepreneurship and the economy, and that it was not willing to wait for the FTC’s attempted noncompetes ban to work its way through the federal court system any longer, Washington’s legislature passed a bill imposing a total ban on noncompetes in Washington after June 30, 2027. The Governor signed that bill on March 23, 2026.
That means any and all noncompetes that may have previously been in place and enforceable under prior law will become null and void in Washington in a little more than a year from now.
Employers will also have until October 1, 2027 to provide notice to any current or former employees or contractors with any noncompete obligations that would have otherwise still been in effect that the restrictions are no longer in effect.
Under the new law, noncompetes are broadly defined to include any contractual commitment (often called “restrictive covenants”) that “prohibits or restrains an employee or independent contractor from engaging in a lawful profession, trade or business of any kind.” This new definition expressly includes the following:
- Covenants, agreements, or contracts “between a performer and a performance space, or a third party scheduling the performer for a performance space” that prohibits or otherwise limits the performer from an otherwise lawful performance;
- Agreements or covenants that directly or indirectly prohibit the acceptance or transaction of business with a customer; and
- “Any provision in an agreement that threatens, demands, requires, or otherwise effectuates that an individual return, repay, or forfeit any right, benefit or compensation, as a consequence of the individual engaging in a lawful profession, trade, or business of any kind.”
Business Sale Exception and Carve-Out of Other Restrictive Covenants/Agreements
The law will still retain existing carve-outs for noncompetes entered in conjunction with the bona fide sale of a business or ownership interest (provided the person being bound to the noncompete sells/acquires/disposes of at least 1% of the business), and others within the franchise sale context.
It will also carve out agreements to repay educational expenses, provided the commitment is in writing and: (a) the repayment obligation expires within 18 months of the employee’s start date; (b) repayment obligations are limited “to the pro rata portion of the remaining time of the 18-month period, and (c) the employee is released from any repayment obligation if they resign for “good cause” as that term is defined in the unemployment statute, RCW 50.20.050 (that is, “good cause” to resign allowing the employee to receive unemployment benefits).
The law will still expressly allow for enforceability of nonsolicitation agreements (also called “nonsolicits”), which restrict a former employee from actively soliciting customers or current employees. The new law will change the restrictions as to nonsolicitation of customers: at present, only prohibitions on soliciting current customers are allowed as nonsolicts (otherwise it is a noncompete), but beginning in July 2027, employers will be only able to restrict former employees from soliciting current and prospective customers, patients, or clients if the employee had an established or substantially developed direct relationship with that person or entity. Additionally, any allowed nonsolicit will not be able to exceed 18 months post-termination. The legislature specifically provided that nonsolicits are to be “strictly construed” otherwise they will be deemed an unlawful “noncompete” and trigger the penalties imposed by statute.
Confidentiality and nondisclosure agreements, or similar covenants protecting trade secrets or inventions, likewise remain enforceable under the law as amended.
Required Notice to Employees/Contractors with Existing Agreements
Finally, businesses with any existing noncompetes with current or former employees or independent contractors that would otherwise have still been in effect must make reasonable efforts to provide written notice to them not later than October 1, 2027, that the agreement/covenant is void and unenforceable. The law is silent on the type or manner of notice, however, so it is possible that we may see additional agency guidance as the notice timeframe draws closer.
Key Takeaways for Employers
- Employers with any noncompetes in place as of now for any Washington personnel must be prepared to send the requisite notice by October 1, 2027, and MUST NOT take affirmative steps to enforce an unenforceable noncompete after June 30, 2027. In fact, employers can be sued if they try to enforce noncompetes after that date, as the law provides affirmative penalties of $5,000 or actual damages, whichever is greater, plus attorneys’ fees, expenses, and costs to the aggrieved party where an employer wrongly asserts an enforceable noncompete. So, it will be important to proactively consult counsel to confirm any existing nonsolicitation or similar agreements that you may be intending to enforce going forward truly meet the limited exception(s) before foregoing the notice and where needed to ensure that notices are done correctly.
- As we noted previously, employers currently using noncompetes that apply in Washington and who are concerned about options after this law goes into effect should consider using other types of agreements to protect their legitimate interests. In fact, a properly drawn nonsolicitation agreement and/or nondisclosure agreement may offer many, and in some situations nearly all, of the same protections that an employer initially sought by using a noncompete. Likewise, invention assignment agreements can ensure that employers own the rights to intellectual property the employees create and keeps it away from competitors. These alternative agreements, or clauses, remain a viable option for most companies, if done correctly. Remember, though, that any of these restrictions must also comply with applicable state law.
- A review of other employee agreements for possible risks is also advisable. For example, an agreement that requires repayment/forfeiture of a signing or other bonus if the employee leaves to go work for a competitor is likely to run afoul of this statute if enforced on or after June 30, 2027. Likewise, stock option or deferred compensation plans may also be a potential trap for the unwary employer, as they often contain noncompetition provisions.
- This is also an ideal time to review, create, and maintain robust policies to protect proprietary information and address confidentiality obligations, and train employees consistently...and often. Comprehensive workplace policies are effective ways to buttress or even supplant post-employment contractual restrictions. In fact, most employers likely already have codes of conduct and confidentiality policies addressing how employees are to handle sensitive and proprietary information. Consider revisiting and updating those now to be sure they are as robust as needed for your unique business interests. And be sure to train all employees on the applicable policies, especially front-line managers who are likely to be the people enforcing these policies.
We hope that this snapshot of the upcoming changes to the law and potential takeaways for employers that we have outlined above is helpful to employers as they navigate these challenging issues. As always, employers should call on us if they have questions or need assistance with evaluating their approach to vaccination and implementing related policies and practices.
The legal issues impacting this topic are and will continue to be ever-changing (Employment Law in Motion!), and since publication of this blog post, new or additional information not referenced in this blog post may be available.
This article is provided for informational purposes only—it does not constitute legal advice and does not create an attorney-client relationship between the firm and the reader. Readers should consult legal counsel before taking action relating to the subject matter of this article.
