Washington’s Recently Amended Non-Competition Restrictions Render Past or Existing Covenants Unenforceable

Takeaways

• Washington will effectively ban all employment non-compete agreements as of 06.30.27, with only limited exceptions, and regardless of when they were signed. 
• Employers must provide notices to current and former employees by 10.01.27 that covered non-competition covenants are void and unenforceable. 
• Confidentiality, certain non-solicitation and limited education-repayment provisions remain permitted if they are narrowly drafted.

Related link

• House Bill 1155

Article

Washington State expanded its restrictions on non-competition agreements to effectively ban all non-compete agreements and covenants in employment. The changes go into effect June 30, 2027.

Employers must notify current and former employees by Oct. 1, 2027, of non-competition covenants that are no longer enforceable. Employers should begin preparing now to address this significant change.

Current Limits on Non-Competition Agreements

Washington State first imposed limits on employers’ use of restrictive covenants in 2019. In 2024, the legislature updated those limits. Under current statutes, employers may enter into non-competition agreements only with certain employees and independent contractors (those with earnings over specific thresholds, currently in 2026 $126,858.83 for employees and $317,147.09 for independent contractors).

Still, non-competition covenants are void and unenforceable unless disclosed in writing to a prospective employee no later than the initial oral or written acceptance of an offer of employment.

Non-competition covenants are void and unenforceable if they are entered into after commencement of employment, unless the employer provides independent consideration.

If an employee’s employment is terminated as the result of a layoff, a non-competition covenant is void unless it includes compensation equivalent to the employee’s base salary at the time of termination for the enforcement period, less compensation earned through other employment during the period of enforcement.

Provisions in non-competition covenants are void and unenforceable if they require adjudication outside Washington or if they allow or require the application of choice-of-law principles or substantive law of any jurisdiction other than the state of Washington.

These restrictions did not apply to:

• Confidentiality agreements; 
• Agreements not to solicit an employee to leave the employer; 
• Agreements not to solicit a current customer of an employer to cease or reduce the extent to which it is doing business with the employer; or 
• Certain covenants in connection with the sale of a business interest.

Finally, current Washington law treats customer non-servicing agreements the same as non-competition agreements.

Non-Competition Covenants Ban

Effective June 30, 2027, all non-competition agreements will become void and unenforceable. Non-competition covenants will no longer be permitted for higher-salaried employees. The statute imposes this ban regardless of when the parties entered into the non-competition agreement, rendering past or existing covenants unenforceable as of June 30, 2027.

It will be an express violation of the statute to enforce, attempt to enforce, or threaten to enforce any prohibited non-competition covenant. It will also be an express violation to represent that an employee or worker is subject to a prohibited non-competition covenant or to enter into or attempt to enter into a prohibited non-competition covenant.

Like California’s well-known statute, the new Washington law defines non-competition covenants as “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 or any kind.”

An addition to the statute’s definition of non-competition agreement specifies “a covenant, agreement, or contract between a performer and a performance space, or a third party scheduling the performer for a performance space, that prohibits or restrains the performer from engaging in a lawful performance.”

The statute continues to define prohibited non-competition agreements to include “an agreement that directly or indirectly prohibits the acceptance or transaction of business with a customer.”

It adds forfeiture and repayment provisions to the definition of prohibited non-competition agreement covenants. Non-competition covenants will include “any provision in an 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.”

Confidentiality Agreements Permitted

Certain non-solicitation and confidentiality agreements will remain outside the definition of prohibited non-competition covenants and therefore are permitted.

Confidentiality agreements are excluded from the definition of non-competition agreement. Although the statute does not define “confidentiality agreements” that are excluded, it separately requires that exceptions to the statute be “narrowly construed.”

Certain Non-Solicitation Agreements Regarding Employees Permitted

Non-solicitation agreements regarding employees are excluded from the definition of non-competition agreement and therefore are permitted. They are defined as agreements that prohibit, upon termination of employment, the solicitation “of any employee of the employer to leave the employer.” A new legislative finding in the statute may further limit this, however; it states that non-solicitation agreements that prohibit an employee from “actively” soliciting “current” employees are not prohibited, but they must be narrowly construed.

Certain Non-Solicitation Agreements Regarding Customers Permitted

Non-solicitation agreements regarding customers also are excluded from the definition of non-competition agreement and therefore are permitted. They are defined as agreements that prohibit, upon termination of employment, the solicitation of “any current or prospective customer, patient, or client of the employer to shift business away from with [sic] the employer if the employer established or substantially developed a direct relationship with the customer, patient, client, or prospect through the employee’s work for the employer and the prohibition expires no later than 18 months following termination of employment.”

The addition of “prospect” may be unclear, given the legislature’s findings in the statute include a statement that non-solicitation agreements that prohibit an employee from “actively” soliciting “current customers” are not prohibited, but they must be narrowly construed.

Certain Educational Repayment Provisions Permitted

The statute also specifically addresses educational expense repayment provisions. Such repayment agreements are not included in the definition of prohibited non-competition covenants if they:

• Expire within 18 months of the employee’s start date of employment; 
• Limit repayment to the pro rata portion of the remaining time of the 18-month period; and 
• Release the employee from a repayment obligation if the employee’s separation from employment is based on “good cause,” as defined in the state’s unemployment benefits statutes.

Moonlighting Restrictions Unchanged

The statutory changes do not affect Washington’s current restrictions on moonlighting. Those remain unchanged. Employers may not restrict, restrain, or prohibit employees who earn less than twice the applicable state minimum wage from working outside the employer, subject to certain narrow restrictions.

Notice of Voidness Required

By Oct. 1, 2027, employers must make reasonable efforts to provide written notice to all current and former employees and independent contractors with a non-competition covenant still within its effective time period. The notice must state that the prohibited non-competition covenant is void and unenforceable.

Retroactivity

The statute permits a cause of action by employees for violations of the statute. Although non-competition covenants entered into before the statute’s June 30, 2027, effective date likely will be rendered unenforceable as of that date, the statute expressly states that it does not apply to legal proceedings commenced before the June 30, 2027, effective date. As the effective date approaches, employers should consider this in deciding whether to commence litigation to enforce agreements up to that point and address breaches of them.

Key Steps for Employers

Employers should:

• Evaluate all past and current non-competition agreements and covenants, including all confidentiality agreements, and non-solicitation provisions in other agreements. 
   
• Evaluate confidentiality, non-solicitation, moonlighting, loyalty, and other policies in handbooks for potential risks. 
   
• Plan to provide notices to past and current employees about non-competition covenants that will be unenforceable after June 30, 2027. 
   
• Evaluate their use of confidentiality and non-solicitation agreements, covenants, and policies, as these tools become more important and useful in protecting employers’ interests.

Please contact a Jackson Lewis attorney about the new law and your specific organizational needs.