On March 23, 2026, Washington Gov. Bob Ferguson signed Engrossed Substitute House Bill (ESHB) 1155, which substantially broadens Washington’s ban on noncompete agreements. Effective June 30, 2027, the law will prohibit employers from enforcing or attempting to enforce noncompetition covenants against all Washington-based workers. The law will also require employers to take reasonable steps by Oct. 1, 2027, to provide affected workers with written notice that their prior noncompete agreements are void and unenforceable. Certain types of agreements, however, are exempted from the ban.
Washington’s Current Restrictions on Noncompete Agreements
Under the current law in Washington, noncompetition agreements are defined as written or oral covenants “by which an employee or independent contractor is prohibited or restrained from engaging in a lawful profession, trade, or business of any kind,” as well as agreements that “directly or indirectly prohibit[] the acceptance or transaction of business with a customer.” Wash. Rev. Code § 49.62.010. Noncompetition covenants currently may be enforced only against employees and independent contractors whose earnings exceed certain thresholds, which are adjusted annually for inflation. Wash. Rev. Code §§ 49.62.020; 49.62.030. (The 2026 earnings thresholds are $126,858.83 for employees and $317,147.09 for independent contractors.)
Even if an employee’s earnings exceed the requisite threshold, a noncompetition covenant is void and unenforceable under current Washington law unless the employer discloses the terms of the covenant in writing to the prospective employee no later than the time the employee initially accepts the offer of employment. If the noncompetition covenant becomes enforceable only at a later date (i.e., if the employee’s compensation subsequently exceeds the requisite threshold for enforcement), the employer must also specifically disclose that the agreement may be enforceable against the employee in the future.
If the parties enter into a noncompetition covenant after the employee begins employment, the covenant is void and unenforceable unless the employer provides independent consideration for the covenant.
Additionally, if the employee is terminated due to a layoff, a noncompetition covenant is unenforceable unless the employer provides the employee with compensation “equivalent to the employee’s base salary at the time of termination for the period of enforcement minus compensation earned through subsequent employment during the period of enforcement.”
Finally, under the current law, any noncompetition covenant with a duration exceeding 18 months after the worker’s termination is presumed to be unreasonable and unenforceable. This presumption may be rebutted by clear and convincing evidence that a duration longer than 18 months is necessary to protect the employer’s business or goodwill.
Scope of Washington’s Forthcoming Ban
Although Washington previously banned noncompetition covenants for lower-wage earners in 2019, the forthcoming ban is broader and is “intend[ed] to ban noncompetition covenants for all Washington-based workers and businesses.”
Effective June 30, 2027, all noncompetition covenants will be unenforceable, regardless of when the parties entered into the agreement. Employers will be prohibited from enforcing, attempting to enter into, “threaten[ing]” to enforce or “represent[ing]” that a worker is subject to a noncompetition covenant. The law applies to employees and independent contractors.
ESHB 1155 broadly defines a “noncompetition covenant” to encompass agreements including:
- “every written or oral covenant, agreement, or contract that prohibits or restrains an employee or independent contractor from engaging in a lawful profession, trade, or business of any kind”;
- “an agreement that directly or indirectly prohibits 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.”
ESHB 1155 also instructs that its provisions, including these definitions “must be liberally construed.”
Agreements Excluded From Ban
Notably, not all employment agreements will be subject to the ban. The following types of agreements will remain enforceable, provided they meet the specified requirements:
- confidentiality agreements;
- covenants “prohibiting use or disclosure of trade secrets or inventions”;
- certain covenants involving ownership interest in a business, “only if the person signing the covenant purchases, sells, acquires, or disposes of an ownership interest representing one percent or more of the business”;
- covenants entered into by franchisees as part of a franchise sale;
- certain written agreements to repay out-of-pocket educational expenses; and
- non-solicitation agreements that “prohibit an employee from actively soliciting current customers or employees away from the employer” (discussed in more detail below).
Because the law says exceptions are to be “narrowly construed,” employers and their legal counsel must carefully review such agreements to ensure that they comply with the specific requirements.
Limitations on Non-Solicitation Agreements
While many non-solicitation agreements are exempt from the ban, ESHB 1155 imposes limitations on these agreements. ESHB 1155 defines a non-solicitation agreement as prohibiting solicitation by an employee upon termination of employment “of any employee of the employer to leave the employer” or “of any current or prospective customer, patient, or client of the employer to shift business away from the employer if the employee established or substantially developed a direct relationship with the customer, patient, client, or prospect through the employee’s work for the employer.”
To be enforceable, a non-solicitation agreement must expire “no later than 18 months following termination of employment.” Critically, a non-solicitation agreement may not prohibit a worker from merely “accepting” or “transacting” business with a customer, as such restrictions are considered unenforceable non-competition covenants under ESHB 1155.
Enforcement and Penalties
Employers that are found liable for violations of the law — in a private action by an “aggrieved” worker or in an action by the Washington attorney general suing on behalf of one or more “aggrieved” workers — will be required to pay either the worker’s actual damages or a penalty of $5,000 — whichever is greater — in addition to reasonable attorneys’ fees, expenses and costs.
Applicability to Unfiled and Pending Actions
Importantly, ESHB 1155 will apply only to lawsuits that are filed on or after June 30, 2027, the date the law takes effect, regardless of when the alleged violation arose.
Requirement to Provide Written Notice of Unenforceable Noncompete Agreements
By Oct. 1, 2027, employers must “make reasonable efforts” to provide written notice to current and former employees and independent contractors whose noncompete agreements are still within their effective time period that these agreements are now void and unenforceable.
Recommendations for Employers
Before the law takes effect next year, employers with Washington-based employees or independent contractors should consider taking the following steps to prepare:
- Review the language of current agreements and consult legal counsel to (1) determine if any agreements are prohibited by the ban, and (2) ensure that any exempt agreements, particularly non-solicitation agreements, comply with all the applicable requirements to be excluded from the ban.
- Compile a list of current and former employees and independent contractors who are subject to noncompetition agreements and strategize how to “make reasonable efforts” to provide these individuals with written notice that the agreements are void and unenforceable.
- Train all employees involved in separation procedures to ensure they understand the impact of the new law on communications with employees during the offboarding process.
For questions about ESHB 1155, including how a particular agreement or covenant might be affected by Washington’s forthcoming ban, contact the authors, your McGuireWoods contact, or a member of the firm’s Trade Secrets & Restrictive Covenants Practice Group.