Washington State Nears Ban on Noncompete Agreements

Quick Hits

• Washington’s state legislature passed a bill to ban noncompetition covenants in the state and prohibit employers from seeking to enforce them on or after June 30, 2027.
• Employers would need to “make reasonable efforts to provide written notice” to employees and former employees with active noncompetition covenants that those covenants are void and unenforceable.
• The law would still allow narrowly drafted nonsolicitation agreements, confidentiality agreements, and covenants not to use or disclose trade secrets.

On March 9, 2026, the Washington State House of Representatives concurred with the Senate’s amendments to Substitute House Bill (SHB) 1155. While Washington law already restricts noncompete agreements, including limiting them to high-earning employees, SHB 1155 would ban all employment-based and independent-contractor–based noncompete agreements.

If signed into law by Governor Bob Ferguson, Washington would join the short but growing list of states that ban or restrict noncompete agreements in employment.

Banning ‘Noncompetition Covenants’

SHB 1155 declares that, effective June 30, 2027, “all noncompetition covenants are void and unenforceable regardless of when the parties entered into the noncompetition covenant.” The bill would further prohibit employers from “enforc[ing], attempt[ing] to enforce, or threaten[ing] to enforce against an employee or worker any noncompetition covenant” or “enter[ing] into or attempt[ing] to enter into a noncompetition covenant with an employee or worker.”

The bill would expand the definition of “noncompetition covenant” to an agreement “that prohibits or restrains an employee or independent contractor from engaging in a lawful profession, trade, or business of any kind.” (Emphasis added.)

The ban on employment-based noncompetition agreements would also apply to any provision in an agreement that would require an employee, as a consequence of “engaging in lawful profession, trade, or business,” to “return, repay, or forfeit any right, benefit, or compensation.” Thus, for example, any provision of a stock option or other equity compensation agreement that required the individual to forfeit such stock options or other equity compensation as a consequence of engaging in postemployment competition with the employer would be unenforceable.

Although SHB 1155 allows for noncompete agreements in connection with the purchase or sale of a business, such agreements would be enforceable only against individuals who acquire or “dispose[] of an ownership interest representing one percent or more of the business.” Other restrictions on competition in hiring or that restrain trade could be considered contracts of adhesion and found unreasonable; such restrictions would be construed liberally, and the exceptions construed narrowly.

Notice Requirements

By October 1, 2027, employers would need to “make reasonable efforts to provide written notice” that an applicable noncompetition covenant is void and unenforceable to any:

• current employee;
• former employee under the effective period of such an agreement; and
• independent contractor, “whose noncompetition covenant is still within its effective time period,” who was required to enter into a noncompetition covenant or contract that included such a provision.

Exclusions

The ban would not apply to all restrictive covenants. Specifically, the definition of prohibited “noncompetition covenants” would not include: nonsolicitation agreements; confidentiality agreements; covenants prohibiting the use or disclosure of trade secrets; covenants restricting the acquisition or disposal of an ownership interest in connection with the sale or acquisition of more than one percent of the business; covenants for franchisees; or “an agreement to pay for education expenses between an employer and a current or potential employee.”

Nonsolicitation Agreements

Although SHB 1155 would not prohibit nonsolicitation agreements—i.e., “an agreement between an employer and employee that prohibits solicitation by an employee, upon termination of employment … [o]f any employee of the employer to leave the employer[,] or … of any current or prospective customer, patient, or client of the employer”—the bill would require “the definition of nonsolicitation agreement [to] be narrowly construed.”

Specifically, a permissible “nonsolicitation agreement” would be one limited in duration to no more than eighteen months that prohibits the active solicitation of the employer’s current or prospective customer, patient, or client by a former employee who had “established or substantially developed a direct relationship with the customer, patient, client, or prospect through the employee’s work for the employer”—not a nonsolicitation agreement whose restrictions only “directly or indirectly” prohibit the former employee from accepting or transacting business with a customer, patient, client, or prospect of the employer.

Effective Date

If SHB 1155 is enacted as proposed, the Washington State Senate’s amendments would set the law’s effective date to June 30, 2027. Any legal proceedings commenced before that date would be governed by the statute as amended prior to the effective date.

Next Steps

SHB 1155 now moves to Washington’s governor for approval. If signed into law, the legislation would make Washington the latest state in a growing constellation of states that restrict noncompete agreements and other restrictive covenants in the employment context because of their perceived detriment to worker mobility and higher wages.

California has banned most employment-based noncompete agreements for more than one hundred years. More recently, North Dakota, Oklahoma, and Minnesota have done the same. Other states, including Colorado, Illinois, Maine, Maryland, Oregon, Rhode Island, and Virginia, have substantially restricted the use of such agreements for employees who do not meet minimum income and/or other requirements. Employers—especially multistate employers—should take care to monitor developments in these and other states.

In addition, employers in Washington State should note that while noncompetition covenants will be unenforceable, other properly drafted employment provisions protecting employer trade secrets, confidential information, and current employees, customers, patients, clients, and prospects from interference and poaching would remain enforceable, if narrowly drafted.

Employers in Washington State may want to review their current use of noncompete agreements and other restrictive covenants and prepare for compliance with SHB 1155.

Ogletree Deakins’ Seattle office and Unfair Competition and Trade Secrets Practice Group will continue to monitor developments and will provide updates on the Healthcare, Hospitality, Multistate Compliance, Sports and Entertainment, Unfair Competition and Trade Secrets, and Washington blogs as additional information becomes available.

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