Washington’s Noncompete Ban: A Practical Guide to Auditing and Updating Your Employment Documents Before the Deadline

Key Takeaways

• Effective June 30, 2027, virtually all Washington noncompetes become void, including most existing agreements
• The statute reaches far beyond traditional noncompetes and may affect equity, bonus, relocation, repayment, and clawback provisions
• Employers must provide notice to affected current and former workers by October 1, 2027
• Violations may result in statutory penalties of $5,000 per violation plus attorneys’ fees
• Employers should begin reviewing and modifying standard forms now

In March 2026, Washington’s Governor signed into law a sweeping bill, House Bill 1155, that will transform the competitive landscape for Washington-based employees and independent contractors. Effective June 30, 2027, HB 1155 renders virtually all noncompetition agreements void and unenforceable, regardless of when those agreements were signed, the employee’s or contractor’s compensation level, or the agreement’s duration. Washington now joins a small but growing group of states — including California, Minnesota, North Dakota, and Oklahoma — that have enacted near-complete bans on noncompetition covenants.

The headline prohibition is significant. For many employers, however, the more consequential development is what the law defines as a “noncompetition covenant.” That definition extends well beyond traditional noncompete clauses and will require employers to scrutinize a wide range of documents that they may not immediately associate with noncompetition restrictions — including offer letters, incentive plans, equity agreements, relocation packages, forgivable loans, separation agreements, and any related policies.

Employers must not wait for the June 30, 2027, effective date to begin this work. The law imposes a separate, affirmative notice obligation with an October 1, 2027, deadline, and the drafting and review process required to achieve compliance will take time. If employers start addressing these issues now, they will open up structural options for reworking noncompliant arrangements that may be foreclosed if they delay.

I. The Litigation Landscape: Why This Matters Now

Washington’s new law does not arise in a vacuum. Over the past several years, noncompete-related class action litigation has proliferated at both the state and federal levels, and the trend has increasingly targeted provisions that do not look like traditional noncompete agreements on their face. 

For example, HB 1155 did not change Washington’s existing prohibition on moonlighting restrictions, RCW 49.62.070, which bars employers from restricting employees earning less than twice the state minimum wage from holding a second job. What has changed is the enforcement climate around it. Following the Washington Supreme Court’s 2025 decision in David v. Freedom Vans LLC, which held that moonlighting restrictions must be reasonable and narrowly tailored, plaintiffs’ counsel have filed a wave of class actions targeting conflict of interest policies, duty-of-loyalty clauses, and outside employment provisions as unlawful moonlighting restrictions. These actions seek a standard statutory penalty of $5,000 and do not require proof of actual damages. To avoid the risk of such draconian penalties, employers should ensure that any such policies are narrowly scoped and do not sweep more broadly than the duty of loyalty permits.

II. The Core Prohibition and Notice Requirement

Effective June 30, 2027, employers may not:

• Enter into a noncompetition covenant with a Washington-based employee or independent contractor;
• Enforce, attempt to enforce, or threaten to enforce any noncompetition covenant, including agreements signed years before the June 30, 2027, effective date; or
• Represent to a worker that they are bound by a noncompetition covenant.

The prohibition applies retroactively. This means that all existing noncompetition agreements, whenever signed, become void and unenforceable on June 30, 2027, as to any proceeding commenced on or after that date. Agreements subject to litigation filed before June 30, 2027, remain governed by existing law.

In addition to the substantive prohibition, by October 1, 2027, employers must make reasonable efforts to provide written notice to all current and former employees and independent contractors whose noncompetition covenants would otherwise still be in effect, informing them that those covenants are void and unenforceable. The law does not define “reasonable efforts”; however, at a minimum, employers should use traceable delivery methods — such as certified mail, registered email, or electronic signature platforms — and document all outreach efforts. 

Any violation of the law, including entering into an unlawful noncompetition covenant, failing to provide timely notice, or continuing to represent that a worker is bound by a void covenant, exposes employers to the greater of actual damages or a statutory penalty of $5,000 per violation, plus attorneys’ fees and costs. The $5,000 penalty also applies if a court enters an order modifying an agreement to make it compliant with the law.

Exceptions are narrow. The law preserves the following as lawful: nonsolicitation covenants that fit statutory exceptions; confidentiality agreements; covenants prohibiting use or disclosure of trade secrets or inventions; covenants entered in connection with the sale of goodwill or other business interest if the individual signing holds at least a 1% ownership interest; certain franchise agreements; written agreements to repay out-of-pocket educational expenses; and a tribal exception. Consistent with the Washington Supreme Court’s approach in Freedom Vans, the statute requires that employee protections be liberally construed and exceptions narrowly construed. Employers should also be aware that courts retain the authority to apply a common law reasonableness test to invalidate noncompetition covenants on grounds independent of the statute — a point the Attorney General has expressly confirmed. Agreements that might appear to fall within a statutory exception could still be challenged on reasonableness grounds.

III. The Expanded Definition of “Noncompetition Covenant”: Where Employers Must Focus

The law’s prohibition is expansive, covering agreements not traditionally considered noncompetes. HB 1155 defines “noncompetition covenant” broadly to reach any written or oral provision that:

1. Prohibits or restrains an employee or independent contractor from engaging in a lawful profession, trade, or business;
2. Prohibits the acceptance or transaction of business with a customer (sometimes called “no-accept” provisions); or
   
3. “[T]hreatens, 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.” RCW 49.62.010(3)(d).

The third category is the most expansive and the most likely to catch employers off guard. Under this definition, the operative question is whether the provision functions as a penalty on post-employment competition. If it does, the provision is a prohibited noncompetition covenant. Employers can assert that any such requirement to return or repay would operate regardless of the reason for separation and not as “a consequence of engaging in a lawful profession, trade, or business.” For example, an employee who retires or quits to pursue a gap year often would not satisfy requirements to retain a signing bonus that had been advanced and conditioned on remaining employed for a certain period. They are thus not losing the incentive based on engaging in another profession, trade, or business but, instead, because they did not meet the time requirements. While this type of departure does not seem to be the focus of the law, the vague wording creates some risk and will likely generate claims from plaintiffs’ counsel testing the statute’s outer boundaries. 

In contrast, clawback provisions, forfeiture-for-competition clauses in incentive or equity plans, repayment obligations triggered by a competitive departure, and similar arrangements are all directly within the statute’s reach. Unlike other states that have enacted similar laws, including California’s new law regarding repayment obligations (Cal. Bus. & Prof. Code § 16608, AB 692) that allows repayment obligations entered into before the law’s January 1, 2026, effective date to remain enforceable, Washington’s law is retroactive. Note that New York’s similar law — the Trapped at Work Act, as amended, effective December 19, 2026 — restricts employment promissory notes and stay-or-pay provisions prospectively and does not expressly apply retroactively, though the absence of a grandfathering clause creates some uncertainty about agreements still in effect after the effective date. 

IV. Practical Steps: What Employers Should Be Doing Now

The June 30, 2027, effective date may seem distant, but savvy employers will begin developing a compliance plan now. Some compliance steps require significant lead time and beginning now will preserve strategic options that will be unavailable to employers who wait. Moreover, employers with operations in multiple states should also treat HB 1155 as an occasion to audit their restrictive covenant programs on a jurisdiction-by-jurisdiction basis. Joining longstanding bans in California, North Dakota, and Oklahoma, a growing number of states — including Colorado, Illinois, Maine, Maryland, Minnesota, Oregon, and Virginia — have enacted noncompete restrictions in recent years, each with varying salary thresholds, notice requirements, and scope limitations. A template revised for Washington compliance may still fall short in these and other states. Multi-state employers should confirm that their agreements satisfy each state’s requirements — a task that reinforces the case for beginning this review sooner rather than later. Employers should also consider employees who work in Washington part of the time or who transfer into the state, as HB 1155 applies to Washington-based workers and an employee’s status as such may not always be obvious. Agreements with workers whose roles have any Washington nexus should be reviewed with that question in mind. Given the number of interpretive questions HB 1155 leaves open, employers should also monitor the Washington Attorney General’s noncompete guidance page, where the Attorney General has signaled active enforcement intentions and where further guidance is likely before the June 30, 2027, effective date.

1. Conduct a comprehensive agreement audit. The most immediate task is to identify all existing and template documents containing provisions that qualify as noncompetition covenants under the expanded HB 1155 definition. This review should encompass employment agreements, offer letters, employee handbooks and policies, sign-on and retention bonus agreements, relocation and forgivable loan arrangements, incentive compensation (bonus and commission) plans, deferred compensation arrangements, equity plan documents and award agreements, separation agreements, and any other document that conditions rights, compensation, or benefits on post-employment conduct. The audit should also extend to operational documents that are not agreements per se — including offboarding scripts, exit interview templates, and any standard communications used during hiring or separation — to confirm that none of them represent an employee as still bound by a noncompetition covenant. Under HB 1155, that representation alone is a violation. Some specific categories to keep in mind:

• Offer letters and sign-on bonus agreements. Repayment provisions triggered specifically by an employee’s decision to work for a competitor are squarely within the new definition. Further, any type of signing bonus paid as an advance with a repayment obligation — even if not conditioned on working for a competitor — may be subject to attack by plaintiffs’ lawyers pushing to expand the boundaries of the law. Restructuring bonuses to pay employees in installments over time or upon certain milestones can avoid repayment obligations that may arguably violate the law. Because sign-on bonus repayment provisions are often targeted over one or more years, employers need to address this now and not provide advance payments that are conditioned on remaining employed on June 30, 2027, or later. 
• Relocation expense repayment agreements and forgivable loans. Arrangements requiring repayment of relocation costs or the outstanding balance of a forgivable loan, where the repayment obligation is triggered by or conditioned on competitive activity, are at risk under HB 1155. 
• Educational expense repayment arrangements. Employers who pay out-of-pocket educational expenses for employees conditioned on continued employment can continue to recover these expenses if the agreement: (1) expires within 18 months of the employee’s start date; (2) limits repayment to the pro rata portion of the remaining time of the 18-month period; and (3) releases the employee from the obligation to repay if the employee’s separation is based on “good cause” under RCW 50.20.050 (an employee-friendly definition used for unemployment eligibility). Employers should construe this exception narrowly and not attempt to pull in other expense advances, such as for relocation or estimated costs of on-the-job training. 
• Incentive compensation plans. Forfeiture-for-competition provisions and clawback clauses requiring repayment of previously paid bonuses as a consequence of competitive conduct are directly within the statute’s definition of a prohibited noncompetition covenant. Both plan documents and individual award agreements should be reviewed. Many incentive plans provide for advanced payments subject to later reconciliation before the incentives are earned. Obligations to repay the advances, like sign-on bonuses, should be carefully reviewed to ensure statutory compliance.
• Equity plans and award agreements. Provisions that accelerate the forfeiture of unvested equity or require disgorgement of gains from vested awards upon competitive activity carry significant risk under the new law. The relevant provisions may appear in the plan document, the form of award agreement, or both.
• Separation agreements and releases of claims. Severance payments or other consideration offered in exchange for a release of claims that includes a requirement not to compete or to follow an overly broad nonsolicitation covenant will constitute prohibited noncompetition covenants effective June 30, 2027. Employers should also evaluate whether separation agreements condition benefits on post-employment conduct in ways that could be characterized as a deterrent to competition.

One practical note that may provide some reassurance to employers is that if an existing agreement contains a void noncompetition covenant, that does not necessarily render the rest of the agreement unenforceable. Courts will typically enforce the remainder of the agreement even where a particular provision is void; however, employers should not rely on this as a reason to delay remediation, as a void provision still exposes the employer to the $5,000 statutory penalty and fees regardless of whether enforcement is ever attempted.

2. Draft new agreements now, building in the June 30, 2027, effective date. Employers understandably may want to leave in place noncompetition covenants that comply with current Washington law through the June 30, 2027, effective date. Relevant considerations differ for current employees and those hired after the employer has developed its compliance plan.

Current employees: Before the effective date, employers should consider whether to require current employees to sign new, HB 1155-compliant forms or instead just provide them notice before the October 1, 2027, deadline that certain provisions are no longer enforceable. As HB 1155 modifies and slightly expands the scope of permissible nonsolicitation covenants, employers with concerns about solicitation may want new agreements, keeping in mind that some consideration beyond continuing employment will be required. Planning early will provide employers with more flexibility to assess appropriate consideration, which may include cash, a pay raise, a promotion, eligibility for a new incentive, equity, or some other item to which the employee is not entitled. 

New employees: The law’s effective date is less than a year away, and employers should consider giving all new employees agreements that comply with HB 1155 now for simplicity. For employers not yet ready to make that change, an alternative for employees hired between now and June 29, 2027, is to use a form expressly contemplating the change: complying with current law and providing that it shifts to HB 1155-compliant terms effective June 30, 2027, with that date of change expressly named. Naming that date expressly, rather than stating the agreement will be modified to comply with applicable law, provides clarity for employees and reduces the risk of disputed enforceability during the transition period. Because the employee will have received an HB 1155-compliant agreement before the effective date — and will not be relying on a void covenant when the law takes effect — employers who act now can avoid the need to provide new consideration, enter into replacement agreements, or send notice to those employees by October 1, 2027. 

3. Restructure incentives where possible. Rather than simply deleting provisions, employers should evaluate whether their underlying business objectives can be achieved through compliant structures. For example:

• Convert advances to earned compensation. Sign-on bonuses or other payments characterized as advances subject to repayment if the employee competes can often be restructured as compensation earned over time. Paying a bonus ratably over a vesting period, rather than upfront with a condition to earn the payment, eliminates the repayment trigger entirely. Employers offering new hires incentives now should consider either having them terminate effective June 30, 2027, or revamping them to pay over time. 
• Redesign retention arrangements. Forgivable loans and similar retention devices can be restructured so that the repayment obligation is triggered by departure for any reason — not competitive activity specifically — with the obligation declining ratably over time. But this is not without risk, and while there is a strong argument that the obligation is simply time-based and not related to competition, this is the type of test case plaintiffs’ counsel may pursue. Thus, employers should think carefully about whether they want to be that test case. And note that for any existing arrangements, employers cannot simply restructure them to change the payment schedule without implicating 409A of the Internal Revenue Code, which imposes limits on changing the timing of existing arrangements.
• Rely on vesting schedules rather than forfeiture provisions. Rather than granting equity subject to forfeiture upon competitive activity, employers can rely on time- or performance-based vesting schedules that reduce or eliminate unvested equity at departure without conditioning the forfeiture on post-employment conduct.

4. Evaluate remaining protective tools. Nonsolicitation, confidentiality, and invention and trade secret-related agreements remain permissible under HB 1155 but must be drafted carefully. For example, to avoid being an unlawful noncompetition covenant, nonsolicitation agreements must be limited to solicitation of current or prospective customers, patients, or clients of the employer with whom the employee established or substantially developed a direct relationship through work and must be capped at 18 months post-termination. Nonsolicitation agreements may not directly or indirectly prohibit accepting or transacting business with a customer, patient, or client absent improper solicitation. Confidentiality agreements must be tailored to avoid sweeping so broadly as to function as de facto noncompetes — for example, by purporting to restrict knowledge or skills the employee developed through general experience, or information that is publicly available. Beyond the agreements themselves, employers should treat the sunset of noncompete protection as a prompt to revisit how sensitive information is managed: limiting employee access to confidential data on a need-to-know basis, implementing appropriate technical controls on systems and files, and conducting thorough offboarding procedures — including confirming return or deletion of proprietary materials — will become a primary line of defense where contractual restrictions no longer exist.

5. Begin planning the October 1, 2027, notice process. Employers should start identifying the population of current and former employees and contractors who will be subject to the written notice requirement, locating contact information, and developing a communication strategy. Employers will want to ensure the method chosen will suffice as “reasonable efforts” to provide notice and should assess what records to retain to demonstrate compliance. Although October 1, 2027, is the statutory deadline, employers should consider providing notice shortly after the June 30, 2027, effective date rather than waiting until the fall. Workers who are not promptly notified may file preemptive suits seeking a declaration that their agreements are void — and because any violation gives rise to the greater of actual damages or a $5,000 statutory penalty plus fees, the window between the effective date and the notice deadline is a period of meaningful litigation exposure.

6. Train human resources (HR) and recruiting teams. The prohibition extends to attempting to enter into a noncompetition covenant and to representing that an employee is subject to one. HR personnel and recruiters involved in hiring, onboarding, and offboarding should be trained on and understand what HB 1155 covers well in advance of the effective date. New hires are typically extended offers well in advance of their start date, so training and compliance cannot wait until the June 30, 2027, deadline. 

7. Evaluate time-sensitive noncompete enforcement decisions. While the new law is retroactive, the one exception is for actions commenced before June 30, 2027. Those actions will be subject to the law in effect before HB 1155. While courts will likely be reluctant to enforce in edge cases, if there are significant violations, employers should file their claim before June 30 so the current, pre-HB 1155 law applies.

8. Assess whether to implement individual arbitration agreements. Although a $5,000 penalty may not seem daunting on an individual level, this area is ripe for class action litigation, as a simple wording violation — even in the absence of an attempt to enforce — gives rise to a violation and award of the greater of actual damages or a $5,000 statutory penalty. Plaintiffs’ counsel are recruiting potential clients and have already brought hundreds of class actions under the current law, and HB 1155’s expansive wording will give rise to many more claims for unprepared employers. One way of minimizing such class action risks is to implement a dispute resolution program that includes individual arbitration agreements. The Federal Arbitration Act allows employers to enter into arbitration agreements with employees that push claims out of court and into arbitration, and these agreements can require individual — not class — determinations. This does not eliminate an employer’s obligation to comply with HB 1155, but it can help make an employer a less attractive target to plaintiffs’ counsel.

© Arnold & Porter Kaye Scholer LLP 2026 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.