Washington Just Banned Noncompetes: What Founders and Employees Need to Know
On March 23, 2026, Governor Bob Ferguson signed Engrossed Substitute House Bill 1155 (SHB 1155) into law, fundamentally reshaping Washington’s rules on noncompete agreements. The law takes effect June 30, 2027, and when it does, virtually all noncompete agreements in Washington will be void and unenforceable—regardless of salary, industry, or when the agreement was signed. If you’re a startup founder, employee, or employer in Washington, here’s what changed, what still works, and what you need to do before the deadline.
Here’s what you need to know about the ban, what still works, and what to do right now with your existing agreements.
What SHB 1155 Does: The Core Ban
SHB 1155 is a near-total ban on noncompete agreements—and a dramatic departure from the prior law. Washington’s 2019 statute permitted noncompetes for higher-wage workers, subject to income thresholds and duration limits. SHB 1155 eliminates that framework entirely. Beginning June 30, 2027, no employer in Washington may enter into, enforce, or even threaten to enforce a noncompete with any employee or independent contractor, regardless of compensation level, role, or seniority. Washington now joins California, Minnesota, North Dakota, and Oklahoma in broadly banning noncompetes for all workers.
Who does it affect? The ban applies to both employees and independent contractors. It doesn’t matter whether the noncompete was signed at hiring, in an existing employment agreement, or as part of a contractor relationship. Income level is irrelevant. If it’s a noncompete, it’s void.
What counts as a noncompete? The definition is expansive and will be liberally construed. It covers any written or oral covenant that prohibits or restrains a person from engaging in a lawful profession, trade, or business. Critically, any agreement that directly or indirectly prevents an employee from accepting or transacting business with a customer is treated as a noncompete, not a non-solicitation. That’s a harder line than the prior law.
The Equity Forfeiture Angle: A Critical Issue for Startups
SHB 1155 expands the definition of prohibited noncompetes to include any provision that requires an employee to “return, repay, or forfeit any right, benefit, or compensation” as a consequence of engaging in competitive work after departure. This has major implications for startup equity plans.
Many equity plans and option agreements include “clawback” or “forfeiture” provisions—language saying that if you leave and go to work for a competitor, you forfeit unvested equity or must return the value of recently exercised options. Those provisions are noncompetes under SHB 1155, and they will be void and unenforceable after June 30, 2027.
Review your equity plan documents and option agreements now. If they include forfeiture-on-competition clauses, those need to be removed or revised before the law takes effect.
The Exception: Noncompetes for Sale of Business
There is one meaningful exception: noncompetes entered in connection with the purchase or sale of a business remain enforceable. But the exception is narrower than it might appear.
The 1% ownership threshold. The sale-of-business exception applies only to individuals acquiring or disposing of an ownership interest representing at least 1% of the business. A key employee who doesn’t own equity can’t be bound to a noncompete just because the company is being sold—the exception only covers actual owners.
What this means practically: If your company is acquired and you own 1% or more, the buyer can require a noncompete as part of the deal. That’s enforceable. If you’re the buyer, you can require noncompetes from qualifying owners of the seller. But once the deal closes, you cannot impose noncompetes on the employees you acquired who don’t meet the exception.
Duration limits still apply: Even sale-of-business noncompetes must be for a reasonable period. Courts have generally treated 1–2 years as reasonable, though the statute doesn’t set a hard limit.
What About Non-Solicitation Agreements?
Non-solicitation agreements are still permitted under SHB 1155, but the law imposes significant new constraints. The definition of “non-solicitation agreement” must be narrowly construed, and the law draws a hard line between permissible non-solicits and prohibited noncompetes.
Here’s what’s allowed:
- Employee non-solicitation: You may prevent a departing employee from soliciting your current employees to leave. These remain enforceable.
- Customer/client non-solicitation: A nonsolicitation agreement may cover current or prospective customers, patients, or clients—but only where the employee established or substantially developed a direct relationship with them through work for the employer, the restriction is limited to shifting business away from the employer, and it expires within 18 months after termination.
- Maximum duration: 18 months. Non-solicitation agreements cannot extend beyond 18 months post-departure.
- No-handling restrictions are prohibited. Any provision that prevents an employee from accepting business from a customer—not just soliciting—is treated as a noncompete and is void.
The practical upshot: non-solicitations must be carefully and narrowly drafted. Broad clauses that were routine before SHB 1155 will not hold up under the new standard.
What About Confidentiality and Trade Secret Agreements?
SHB 1155 does not ban confidentiality agreements, non-disclosure agreements (NDAs), or agreements protecting trade secrets. These remain fully enforceable.
This is important: you can still protect your proprietary information, customer lists, source code, and business strategies through confidentiality and trade secret agreements. The law only bans agreements that restrict competitive activity.
Example: A developer leaves your company and signs an NDA promising not to disclose your source code or proprietary algorithms. That NDA is still enforceable under SHB 1155. But a clause in the same agreement that says “you can’t work for Company X or any company in the AI space for one year” is a noncompete and is void.
Many employers are now rewriting their restrictive covenants as confidentiality-heavy agreements, focusing on what the employee knows and owns rather than where they can work. This is a smarter approach and remains lawful.
IP Assignment Agreements
Intellectual property (IP) assignment agreements—which state that work product, inventions, code, and creative work created by the employee belong to the company—are not noncompetes and remain fully enforceable.
You can still ensure that any code, product features, or business processes developed by employees during their tenure are owned by the company, not by the departing employee.
How SHB 1155 Compares to Other States
California’s approach: California has banned noncompetes since 1872. There are narrow exceptions (sale-of-business with ownership threshold, partnerships, LLCs), but California courts void any noncompete regardless of salary. Washington’s new law is similar in practical effect—the income-threshold framework is gone and the ban is categorical—though the two states’ statutes differ in structure, with Washington retaining express carveouts for nonsolicitation agreements and the sale-of-business exception.
Massachusetts: Massachusetts restricts noncompetes heavily but still permits them in many cases if “reasonable.” Washington’s approach is stricter.
Oregon: Oregon banned noncompetes in 2004 but allows them in narrow circumstances (sale of business, partnership dissolution). Washington’s new law is more categorical.
New York: New York historically enforced noncompetes if “reasonable” in scope and duration. Noncompetes for highly compensated employees remain common and enforceable in New York.
Washington is now one of the strictest states on noncompetes, in line with California. If you hire across multiple states, your Washington workers have substantially stronger protections than workers in most other states.
What This Means for Startups Hiring in Washington
You can hire from competitors without a noncompete defense. Competitors’ noncompetes against their Washington employees will be void by June 30, 2027. This is liberating in a competitive talent market.
You can’t use noncompetes to retain talent. Your tools are: competitive compensation and equity, a strong culture, and well-drafted confidentiality and IP agreements.
This is actually better for startup culture. The ability to hire freely from competitors is one reason Silicon Valley thrived. Washington is now aligned with California in this regard, making the state more attractive to high-quality technical talent.
But you need to protect your IP and customer relationships differently. Focus on rock-solid NDAs, IP assignment agreements, trade secret protections, and carefully drafted non-solicitations capped at 18 months.
What Employers Must Do Now: Five Action Items
1. Audit your existing noncompete and equity agreements. Identify any noncompete clauses in employment agreements, offer letters, contractor agreements, and equity plan documents. All of it becomes void and unenforceable on June 30, 2027.
2. Send written notice by October 1, 2027. SHB 1155 requires employers to make reasonable efforts to notify all current employees—and former employees still within a restricted period—that their noncompetition covenants are void. The deadline is October 1, 2027. Violations carry a $5,000 statutory penalty per aggrieved person (or actual damages, whichever is greater) plus attorneys’ fees.
3. Update your new hiring documents. Remove noncompete clauses from offer letters and employment agreements. Focus instead on confidentiality, IP assignment, and narrowly tailored non-solicitation language.
4. Revise equity plan documents. Remove or restructure any forfeiture-on-competition provisions in your equity incentive plans, option agreements, or restricted stock agreements. These are now prohibited noncompetes under SHB 1155.
5. Strengthen your confidentiality and IP agreements. Lean heavily on NDAs that clearly identify what’s confidential, IP assignment agreements that unambiguously vest work product in the company, and non-solicitation agreements tightly scoped to meet the new law’s requirements.
What About Existing Noncompetes?
Beginning June 30, 2027, noncompetition covenants become void and unenforceable—including covenants signed before that date. However, the statute’s application is more precise than the word “retroactive” suggests: legal proceedings commenced before June 30, 2027 continue under prior law, while proceedings commenced on or after that date fall under SHB 1155 regardless of when the cause of action arose. There is no grandfather clause for future proceedings.
If you have a noncompete and are thinking of joining a competitor, understand that once the law takes effect, that agreement is void—you don’t need a court to strike it down. If you’re an employer relying on existing noncompetes, plan now for a world in which those agreements are unenforceable against Washington-based workers starting June 30, 2027.
The Notice Deadline: October 1, 2027
SHB 1155 includes an affirmative employer obligation: by October 1, 2027, employers must make reasonable efforts to provide written notice to all current and former employees and independent contractors subject to noncompetition covenants that those covenants are void and unenforceable. This applies to former employees still within a restricted period of an active noncompete.
Put October 1, 2027 on your calendar now. Failing to provide the required notices exposes employers to the same $5,000 per-violation penalty (or actual damages, whichever is greater) plus attorneys’ fees.
The Bottom Line
Washington has joined California in broadly banning noncompetes. This is one of the most significant shifts in Washington employment law in decades.
The key facts: SHB 1155 was signed March 23, 2026 and takes effect June 30, 2027. Beginning on that date, noncompetition covenants—including those signed before the effective date—become void and unenforceable in proceedings commenced on or after June 30, 2027. The income threshold and garden leave framework of the 2019 law are gone. Equity forfeiture clauses tied to competitive activity are also prohibited. Non-solicitations survive, but only if narrowly drafted, limited to relationships the employee established or substantially developed, and capped at 18 months. Employers must send written notice of voided noncompetes by October 1, 2027.
The upside: you can hire freely from competitors, and your employees have full freedom to pursue opportunities. Your tools for retaining talent are now compensation, equity, culture, and strong confidentiality protections—not legal restrictions on where people can work.
If you’re a founder in Washington, this is also an opportunity: Washington’s noncompete ban makes the state more attractive to high-quality talent who value their freedom to move. Use that to your advantage.
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