Washington Just Banned Noncompetes: What Founders and Employees Need to Know
On March 23, 2026, Governor Bob Ferguson signed Engrossed Substitute House Bill 1155 (ESHB 1155) into law. Beginning June 30, 2027, virtually all noncompete agreements in Washington will be void and unenforceable—regardless of salary, industry, or when signed. Here’s what changed, what still works, and what employers need to do before the deadlines.
What ESHB 1155 Does: The Core Ban
ESHB 1155 is a near-total ban on noncompete agreements—a sharp break from Washington’s 2019 statute, which still permitted noncompetes for higher-wage workers subject to income thresholds and duration limits. Beginning June 30, 2027, no employer may enter into, enforce, threaten to enforce, or represent that a worker is subject to a noncompete, regardless of compensation, role, or seniority. Washington 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. Restrictions that directly or indirectly prohibit accepting or transacting business with a customer already fall within the existing statutory noncompete definition under SSB 5935 §2 / RCW 49.62.010 (effective June 6, 2024). Those restrictions must satisfy the currently applicable noncompete rules; labeling them nonsolicitation does not avoid those rules. The broader prohibition and revised nonsolicitation definition under ESHB 1155 take effect June 30, 2027—that classification alone does not make every customer non-dealing restriction categorically prohibited today.
The Equity Forfeiture Angle: A Critical Issue for Startups
ESHB 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 include clawback or forfeiture-on-competition language—forfeiting unvested equity or requiring repayment if the worker joins a competitor. Under ESHB 1155 those provisions are noncompetes and become void after June 30, 2027. Review plan and option documents now and remove or restructure those clauses before the law takes effect (prepare now; the prohibition is not yet operative).
The Exception: Noncompetes for Sale of Business
There is one meaningful statutory exception. Under RCW 49.62.010, a covenant entered into by a person purchasing or selling the goodwill of a business—or otherwise acquiring or disposing of an ownership interest—is excluded from the definition of “noncompetition covenant,” but only if the person signing the covenant purchases, sells, acquires, or disposes of an interest representing one percent or more of the business. Merely holding a 1% interest is not the statutory test; the signer must be the party who buys, sells, acquires, or disposes of that qualifying interest.
Qualifying for the exception is not the same as automatic enforceability. Even a covenant that falls within the statutory carve-out remains subject to common-law reasonableness limits on duration, geographic scope, and the activities restrained. Courts have historically been more generous with sale-of-business covenants than with employment noncompetes—multi-year terms are common in acquisition agreements—but reasonableness still matters.
What this means practically: If you sell or dispose of an ownership interest of 1% or more in an acquisition, a noncompete you sign as part of that transaction may qualify for the statutory exception—and a buyer can seek such covenants from owners who sell or dispose of a qualifying interest. A key employee who does not purchase, sell, acquire, or dispose of a qualifying ownership interest cannot be bound under this exception merely because the company is being sold. After closing, you generally cannot impose noncompetes on acquired employees who do not themselves enter a qualifying ownership transaction.
What About Non-Solicitation Agreements?
Non-solicitation agreements remain permitted under ESHB 1155, but with tighter limits. The definition must be narrowly construed, and the law draws a hard line between permissible non-solicits and prohibited noncompetes:
- 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.
- Where the 18-month cap sits. The 18-month expiration appears in the customer/client limb of the statutory definition, joined to that limb’s own conditions. The employee-solicitation limb carries no durational language. Whether a court reads the limit as reaching both is an open question, and practitioner summaries differ, so the conservative drafting choice is to cap both at 18 months.
- Customer accept-or-transact restrictions are already noncompetes under current law. Restrictions that prevent an employee from accepting or transacting business with a customer already fall within the statutory noncompete definition in RCW 49.62.010; calling them nonsolicitation agreements does not avoid the existing noncompete requirements. That classification alone does not make every such restriction categorically void today. Beginning June 30, 2027, ESHB 1155’s broader prohibition takes effect, subject to the statutory exceptions and transition rules already explained in this article.
Broad non-solicit clauses that were routine before ESHB 1155 will not hold up under the new standard.
What About Confidentiality and Trade Secret Agreements?
ESHB 1155 does not ban confidentiality agreements, NDAs, or trade-secret protections. Properly limited agreements remain available, subject to protected disclosures and other legal limits (see RCW 49.44.211). You can still protect proprietary information through carefully drafted confidentiality and trade-secret agreements; renaming a noncompete as an NDA does not cure an unlawful restriction.
Example: An NDA that bars disclosure of source code or proprietary algorithms remains available. A clause in the same agreement that says “you can’t work for any company in the AI space for one year” is a noncompete and is void—and calling it confidentiality does not save it. Rewriting restrictive covenants as confidentiality-heavy agreements helps only when the agreement truly protects confidential information; changing the label alone does not make an unlawful noncompete enforceable.
IP Assignment Agreements
IP assignment agreements are not noncompetes under ESHB 1155, but employment alone does not give the company everything an employee develops. Under RCW 49.44.140, an employee generally retains inventions developed entirely on personal time without using the employer’s equipment, supplies, facilities, or trade secrets—subject to exceptions for inventions related to the employer’s business or anticipated R&D, or resulting from work for the employer. Washington also requires written notice of that protection. Properly scoped assignments remain available; blanket “everything you invent belongs to us” claims are not how the statute works.
How ESHB 1155 Compares to Other States
California’s approach: California has banned noncompetes since 1872, with narrow exceptions. Once Washington’s broader ban begins June 30, 2027, the practical effect is similar—the income-threshold framework ends and the ban becomes categorical (ESHB 1155 §§4, 7 and 9)—though Washington retains express carveouts for nonsolicitation and the sale-of-business exception. Until that date, the 2019 income-threshold and garden-leave framework remains currently effective law.
Massachusetts: Massachusetts restricts noncompetes heavily but still permits them in many cases if “reasonable.” Washington’s approach is stricter.
Oregon: Oregon restricts rather than bans noncompetes (ORS 653.295)—income thresholds, advance notice, and duration caps. Washington’s new law is far 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 will be among the strictest states on noncompetes, in line with California—so multi-state employers should treat Washington workers differently in their restrictive-covenant playbooks.
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. Retention tools are compensation, equity, and well-drafted confidentiality and IP agreements—not post-employment bans on competitive work.
Protect IP and customer relationships differently. Lean on NDAs, IP assignment agreements, trade secret protections, and carefully drafted non-solicitations (customer non-solicits capped at 18 months).
Employer Checklist: Prepare Now for June 30, 2027 and October 1, 2027
Two dates matter, and they are not the same: the broader ban takes effect June 30, 2027; separately, by October 1, 2027, employers must make reasonable efforts to give written notice to covered current and former workers (RCW 49.62.020).
1. Assign responsibility. Designate who owns the review and coordinates HR, legal, and equity administration; set a timeline that clears both deadlines.
2. Collect the documents. Gather offer letters, employment and contractor agreements, separation agreements, equity awards and plans, and amendments. Look for competition-triggered forfeitures as well as labeled noncompetes.
3. Classify the restrictions. Separate prohibited noncompetes from potentially permissible nonsolicitation, confidentiality, IP, and statutory-exception covenants. Flag uncertain provisions for counsel. Do not delete entire agreements indiscriminately.
4. Build the notice list. Identify current and former employees and independent contractors whose noncompetition covenants remain within their effective time periods. Track the agreement, restriction, contact info, review outcome, and notice status. Expired covenants outside their effective period generally do not belong on the October 1, 2027 notice list.
5. Document reasonable notification efforts. By October 1, 2027, make reasonable efforts to provide written notice that covered noncompetition covenants are void and unenforceable (RCW 49.62.020). Practical steps—recommendations, not invented statutory mandates—include using available email or mailing addresses, keeping copies, and recording failed delivery and follow-up. The statute does not require signed acknowledgments.
6. Update documents and train managers. Prepare onboarding, offboarding, equity, and contractor templates for the new regime, including removing or restructuring forfeiture-on-competition provisions before June 30, 2027. Train managers that, beginning that date, RCW 49.62.020 also prohibits representing to a worker that the worker is subject to a prohibited noncompete—not only filing an enforcement lawsuit.
Transition for pending cases. Proceedings commenced before June 30, 2027 continue under prior law; proceedings commenced on or after that date follow the new provisions regardless of when the cause of action arose (RCW 49.62.100). No grandfather clause for future proceedings on older covenants.
Remedies. If a court or arbitrator determines a chapter 49.62 RCW violation, the violator must pay the greater of actual damages or a $5,000 statutory penalty, plus reasonable attorneys’ fees, expenses, and costs (RCW 49.62.080). That is not an automatic per-missed-notice multiplier without that determination.
The Bottom Line
Washington has joined California in broadly banning noncompetes—one of the most significant shifts in Washington employment law in decades.
Key facts: ESHB 1155 was signed March 23, 2026; the broader ban begins June 30, 2027 (ESHB 1155 §§4, 7 and 9). From that date, noncompetition covenants—including those signed earlier—are void in proceedings commenced on or after June 30, 2027; proceedings commenced before that date continue under prior law (RCW 49.62.100). Until then, the 2019 income-threshold and garden-leave framework remains currently effective. Equity forfeiture tied to competitive activity is prohibited under the new regime. Narrow nonsolicitations survive, with customer non-solicits capped at 18 months. Written notice of voided noncompetes is due by October 1, 2027.
Practically, competitors’ noncompetes against Washington workers will not be a hiring barrier once the broader ban takes effect, and retention shifts toward compensation, equity, and strong confidentiality and IP protections rather than post-employment bans.
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