Washington State Bans and Voids Most Noncompetes, Narrows Nonsolicits

Executive Summary

In less than three months’ time, all worker noncompetition and nonacceptance of business provisions in Washington state will become void and unenforceable unless they qualify for one of the limited exceptions to the ban, thanks to a new law signed by Washington’s Governor Bob Ferguson on March 23, 2026. The new law takes effect June 30, 2026.

The new law applies not only to traditional noncompetes, but also to forfeiture, clawback and many repayment agreements that function to deter post-employment competition.

The ban does not apply to the following:

• Qualified nonsolicitation provisions that meet the statute’s requirements;
• Confidentiality and nondisclosure provisions;
• Noncompetition provisions entered as part of the sale of sufficient equity interests or as part of certain franchise sale agreements; and
•  Qualified educational expense repayment agreements.

The state’s actions follow a trend in many states to restrict the use of noncompetition agreements and other restrictive covenants that limit a departed worker’s ability to compete with their former employer for business.

What Is Covered?

Washington Governor Bob Ferguson signed Engrossed Substitute House Bill 1155 (ESHB 1155) into law on March 23, 2026.  The law follows previous efforts in Washington to limit the use of noncompetes by prohibiting them with employees and contractors who earned below certain annual income thresholds.  For 2026 and until June 30, 2026, those thresholds are $126,858.83 for employees and $317,147.09 for independent contractors.

The law signed on March 23 eliminates the income thresholds and declares all noncompetition covenants void effective June 30, 2026, unless the noncompetition agreement meets one of the few statutory exceptions.

The ban applies broadly and covers far more than traditional post-employment noncompetition clauses.  The new law also applies to:

• Noncompetition agreements with independent contractors and performers;
• Nonacceptance of business provisions, i.e., provisions that “directly or indirectly prohibit[] the acceptance or transaction of business with a customer;”
• Any provision “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”—in other words, clawbacks, forfeitures and repayment provisions.

These last two parts are particularly noteworthy.

First, many employers use nonsolicitation provisions that define solicitation to include the acceptance of business.  The new law allows nonsolicitation clauses, but does not allow such provisions to preclude the acceptance of business with customers.

It remains to be seen whether the courts will interpret this to mean a provision that prohibits the acceptance of unsolicited business is void as an unlawful noncompete, or whether the law more broadly prohibits injunctions that prevent the acceptance of even solicited business, leaving damages or other monetary relief as the only suitable remedies for the breach of a nonsolicitation provision. This is an interesting—and impactful—decision for future courts to make.

Second, the expansion of the definition of noncompetition covenants to include clawbacks, forfeitures and repayment provisions may restrict an employer’s ability to forfeit or reclaim all manners of equity, signing bonuses, loans, advances and potentially other benefits that are conditioned on the employee’s honoring of a post-term noncompetition agreement.  This differs fromhow other states such as Delaware handle forfeitures and clawbacks, which typically are enforceable even when more traditional forms of noncompetition agreements are not.

Once again, future courts will need to determine the full extent of the law’s application. Does the new law apply to all agreements to repay a benefit upon the conclusion of employment, or only those that are triggered solely based on whether the former employee competes with former employer?  What about broadly-worded forfeitures and clawbacks that are only enforced against departed employees who compete?  This will need to be sorted out by the courts.

What Isn’t Covered?

The law excepts the following from its definition of prohibited “noncompetition covenants”:

• Nonsolicitation agreements that prohibit the solicitation of the employer’s employees “to leave the employer”;
• Nonsolicitation agreements that prohibit the solicitation of current and prospective customers to “shift business away from the employer,” if (1) the employee “established or substantially developed a direct relationship with the customer, patient, client or prospect through the employee's work for the employer” and (2) the provision lasts no more than 18 months post-termination;
• Confidentiality agreements and provisions against the disclosure of trade secrets or inventions;
• Noncompetition provisions entered as part of the sale of sufficient equity interests or as part of certain franchise sale agreements; and
•  Qualified educational expense repayment agreements.

The last category is interesting and creates a direct exception to the law’s inclusion of other forms of repayment agreements.  However, only certain educational expense repayment agreements are excepted.  Qualified educational expense repayment agreements must:

• Be in writing and limited to repayment of out-of-pocket educational expenses;
• Expire within 18 months of the employee's start date
• Limit repayment to the pro rata portion of the remaining time of the 18-month period; and
• Release the employee from the repayment obligation if the employee's separation from employment is based on "good cause" under RCW 50.20.050.

Enforcement

The new law prohibits any employer from seeking to enforce an unlawful noncompetition agreement and requires employers to make “reasonable efforts” to provide written notice to all former and current employers subject to a covered noncompetition agreement by October 1, 2027 that their noncompetition agreements are no longer valid.

The law permits the state’s attorney general to enforce its provisions and seek “any and all relief,” and creates a private cause of action for people who are subject to noncompetition agreements prohibited by the new law.  Such aggrieved individuals are permitted to recover their actual damages or a statutory penalty of $5,000, plus their reasonable attorneys’ fees, expenses and costs.

What to Do?

The new law will require prompt action by employers and other businesses with employees or independent contractors in the state of Washington to update their existing agreements and to change their new agreements by June 30, 2026.  Businesses should carefully consider whether their existing agreements and templates include provisions covered by the new law.

Although there is no statutory requirement to notify employees and contractors that their noncompetition agreements are void until October 10, 2027, businesses may wish to do so sooner to avoid unnecessary legal disputes with workers and former workers who may pursue causes to have their agreements declared invalid, and thereby recover damages and attorneys’ fees.

Crowell & Moring's attorneys have extensive experience advising employers on noncompetition agreements, nonsolicitation provisions, and other restrictive covenants across all 50 states. If you have questions about Washington's new noncompete ban, need assistance evaluating and updating your existing agreements to comply with the new law, or require guidance on noncompete and restrictive covenant matters anywhere in the United States, please contact the authors of this alert.