Significant changes are coming to the Washington employment landscape. On March 23, 2026, Governor Bob Ferguson signed Engrossed Substitute House Bill 1155 (SHB 1155), which will render nearly all non-competition covenants void and unenforceable starting June 30, 2027.
This new law represents a major shift from previous regulations that allowed non-compete agreements for high-earning employees, now extending the ban to nearly all workers and independent contractors regardless of their income level.
Understanding the Expanded Scope
SHB 1155 does not just ban traditional non-compete clauses; it significantly broadens the definition of what constitutes a “noncompetition covenant”. Key takeaways include:
- Comprehensive Ban. All non-competition agreements, including past and current agreements, will be void and unenforceable as of the effective date unless they meet one of the exception criteria outlined below.
- Broad Definitions. The ban includes any provision that restrains an individual from engaging in a lawful profession, such as clauses that prohibit accepting business from former customers or those that require the forfeiture of compensation or other benefits for competing.
- Retroactive Impact. The law applies to agreements signed before the effective date, meaning existing non-competes will no longer be valid after June 30, 2027.
- Restriction on Financial Penalties. For the first time, agreements requiring employees to repay or forfeit benefits for engaging in competitive work are classified as prohibited non-competes.
Permitted Exceptions
While the ban is sweeping, certain narrow protections for employers remain permissible if they are carefully drafted:
- Non-Solicitation Agreements: These remain allowed but must be narrowly tailored to active solicitation (not just “accepting” business) and are capped at a maximum duration of 18 months.
- Confidentiality and Trade Secrets: Agreements protecting trade secrets or prohibiting the disclosure of proprietary information remain enforceable.
- Sale of Business: Non-competes may still be used in the context of the sale of a business or the disposal of an ownership interest of at least percent.
- Educational Expenses: Repayment agreements for bona fide, out-of-pocket educational expenses (sometimes referred to as TRAPs) are permitted, but only if specific conditions are met. The repayment obligation must be limited to no more than 18 months from the date of hire and must be prorated over that period. In addition, the agreement must be waived if the employee’s employment ends for a reason that would qualify as “good cause” under the state’s unemployment insurance law.
Next Steps for Employers
With the effective date approaching, Washington employers should take proactive steps to remain compliant and avoid potential statutory penalties:
- Conduct a Comprehensive Audit: Review all current and template employment contracts, independent contractor agreements, and equity or bonus plans to identify prohibited non-compete or repayment language.
- Prepare Mandatory Notifications: By October 1, 2027, employers must make “reasonable efforts” to provide written notice to all current and certain former employees informing them that their existing non-compete covenants are void.
- Refine Protective Covenants: Focus on strengthening confidentiality, trade secret protections, and compliant, narrowly drafted non-solicitation agreements as primary tools for protecting business interests.
- Consult Legal Counsel: Because violations can result in actual damages or a $5,000 statutory penalty (plus attorney fees), seek expert advice to ensure all revised documents meet the new legal standards.
