Washington State Non-Compete Ban Recently Signed Into Law

Washington Governor Bob Ferguson recently signed into law HB 1155 effectively implementing a ban on non-compete agreements for all employees and independent contractors in the state.  While Washington law already prohibited non-competes for lower wage workers, this new law represents a significant shift for employers with employees and independent contractors in Washington.

Beginning June 30, 2027, employers will no longer be able to enter into non-compete agreements with Washington employees or independent contractors. Employers also will be prohibited from enforcing, attempting to enforce, or threatening to enforce non-compete restrictions against Washington employees or independent contractors, including restrictions that had been entered into before the law goes into effect. Further, by October 1, 2027, employers are required to make “reasonable efforts” to provide written notice to all current and former employees and independent contractors who have a non-compete restriction in place that is still within its effective time period. 

Under the new law, a non-compete agreement includes “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.”  Non-compete agreements are also expanded to include any 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.”  This provision expressly does not apply to repayment obligations for employees’ out-of-pocket educational expenses, but aside from that explicit carve out, it remains to be seen how this limitation will be interpreted by the courts or regulatory authorities.

The remedies available to aggrieved employees and independent contractors have not changed under HB 1155 and continue to be actual damages or statutory damages of $5,000 plus reasonable attorneys’ fees, expenses, and costs.

Exceptions: Non-Solicitation Agreements and Sale of Business Non-Competes

HB 1155 confirmed that employers may continue to enter into non-solicitation agreements that prohibit the solicitation of current employees and customers, including agreements that prevent solicitation of both current and prospective customers. However, such non-solicitation restrictions on customer relationships may last for no longer than 18-months post-employment and must be limited in scope to those “established or substantially developed” through the employee’s work for the employer.

Non-compete agreements entered into in connection with the sale of a business also remain valid under HB 1155, subject to the same thresholds that are currently in place under applicable Washington law. 

If you would like more information about this new law or are seeking assistance with any other Washington employment law matters, please reach out to Laura Fauber.