Hunton Employment & Labor Perspectives

On March 23, 2026, Washington Governor Bob Ferguson signed a bill (Substitute House Bill “SHB” 1155) that will render employment-based non-compete agreements with employees and independent contractors void and unenforceable beginning June 30, 2027. With this legislation, Washington joins states like California, Minnesota, North Dakota, and Oklahoma in generally prohibiting employment-based non-compete agreements.

 What the Bill Does

The adoption of SHB 1155 expands the state’s pre-existing restrictions on employee non-compete agreements, which were previously limited to certain high-earning employees and independent contractors. The bill’s stated purpose is to “ban noncompetition covenants for all Washington-based workers and businesses,” and expands the definition of a noncompetition covenant to include “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.”

This definition covers not only traditional covenants that bar an employee or independent contractor from working for a competitor, but also agreements that (1) directly or indirectly prohibit accepting or transacting business with a customer or (2) require someone to return, repay, or forfeit compensation or benefits because they engage in lawful work elsewhere.

Significantly, the bill, which takes effect on June 30, 2027, will render all existing non-compete covenants void and unenforceable.

 Who Is Affected

The bill intends to ban noncompetition agreements with “all Washington-based workers and businesses[,]” including both employees and independent contractors. It explicitly prohibits employers from (1) enforcing, attempting to enforce, or threatening to enforce a noncompete covenant against an employee or worker; (2) representing that the employee or worker is subject to a noncompete covenant; or (3) entering into or attempting to enter into a noncompete covenant with an employee or worker.

“Employer” is defined by the bill as any person, firm, corporation, partnership, business trust, legal representative, or other business entity which engages in any business, industry, profession, or activity in Washington and employs one or more employees or who contracts with one or more persons for their personal labor.

 What Is Still Permitted

The bill does not prohibit non-solicitation agreements but makes clear they must be narrowly construed.

A “non-solicitation agreement” permitted by the bill is an agreement between an employer and employee that bars the employee upon termination of employment from soliciting (1) any employee of the employer to leave the employer or (2) current or prospective customers, patients, or clients with whom the employee established or substantially developed a direct relationship through the employee’s work, provided the restriction expires within 18 months after termination.

Non-solicitation agreements may not directly or indirectly prohibit the employee from accepting or transacting business with a customer, patient, or client.

The definition of a noncompetition covenant also excludes several other arrangements, including confidentiality agreements, covenants prohibiting use or disclosure of trade secrets or inventions, certain covenants entered in connection with the sale of a business or ownership interest, certain franchise-sale covenants, and certain qualifying agreements requiring repayment of out-of-pocket educational expenses. To qualify, an educational-expense repayment agreement must expire within 18 months of the employee’s start date, require only pro rata repayment for the unexpired portion of that 18-month period, and release the employee from repayment obligations if the separation is for “good cause” under Washington law.

 Employer Notice Requirements

Employers must make reasonable efforts to provide written notice to all current and former employees and independent contractors with non-compete covenants that are still within their effective time period by October 1, 2027, that their non-compete covenants are void and unenforceable.

 Enforcement and Remedies

The bill gives both public and private actors enforcement authority. The Washington attorney general may pursue any and all relief on behalf of affected persons, and an aggrieved person may also bring a claim directly.

If a court or arbitrator determines that a person violated the chapter, the violator must pay the greater of actual damages or a $5,000 statutory penalty, plus reasonable attorneys’ fees, expenses, and costs.

The bill also provides that the chapter displaces conflicting tort, restitutionary, contract, and other state laws relating to liability for competition by employees or independent contractors, although it does not amend or modify Washington’s Uniform Trade Secrets Act.

Other Notable Points

The legislature expressly states that the bill’s provisions in favor of workforce mobility and worker protection must be liberally construed, with exceptions construed narrowly.

Critically, the bill does not impact RCW 49.62.050, which renders void and unenforceable any contractual provision in a noncompete that requires a Washington-based employee or independent contractor to (1) adjudicate a noncompetition covenant outside of Washington, or (2) applies the substantive law of any jurisdiction other than Washington, or otherwise deprives the individual of the protections or benefits of Washington’s noncompete statute. In essence, employers cannot avoid the bill’s requirements simply by including choice-of-law or forum-selection clauses that apply the law of a state other than Washington.

Employer Recommendations

Since the bill is not scheduled to take effect for more than a year, employers should take this opportunity to review and update their existing agreements with employees and independent contractors to ensure compliance with the new law. 

• Employers should review their current restrictive covenant agreements to ensure agreements with impacted employees and independent contractors, among other things, do not contain impermissible noncompete covenants or choice of law provisions, and that non-solicitation provisions carefully conform to the bill’s narrowed definition. Agreements that directly or indirectly prohibit the acceptance or transaction of business with a customer, patient, or client merit particular attention, because the bill treats those provisions as noncompetition covenants rather than permissible non-solicit agreements.
• Employers should also consider strengthening confidentiality agreements and trade secret protections. The bill expressly excludes confidentiality agreements and covenants prohibiting the use or disclosure of trade secrets or inventions from the definition of a noncompete covenant, and the legislature states that businesses have more specific and effective legal means to protect intellectual property, trade secrets, and clients without harming workers, contractors, and the public.
• Educational repayment arrangements should be reviewed as well to take advantage of the bill’s safe harbor provision. Repayment agreements must expire within 18 months of the employee’s start date, require only pro rata repayment for the remaining portion of that 18-month period, and release the employee from repayment obligations if the separation is for “good cause” under Washington law.
• Equity, bonus, and incentive compensation arrangements also should be reviewed for competition-based forfeiture provisions and revised if the forfeiture or clawback of any benefits or compensation is triggered by post-employment competition, as the bill’s definition of a noncompetition covenant extends to provisions that threaten, demand, require, or otherwise effectuate the return, repayment, or forfeiture of any right, benefit, or compensation because an individual engages in lawful work.

Finally, employers should prepare to provide the required notices.  By October 1, 2027, employers must make reasonable efforts to provide written notice to current and former employees and independent contractors (whose noncompetition covenants are still within their effective time periods) that the covenants are void and unenforceable. As a result, it is important for employers to identify affected workers, locate legacy agreements that may still appear operative, and develop a process for distributing and documenting the requisite notices.