Washington is on the verge of banning nearly all post-employment/post-service employee and contractor noncompete agreements, save for certain sale of business noncompetes and narrowly constructed nonsolicits, after the state legislature passed HB 1155. The bill, which would take effect June 30, 2027, now awaits the governor’s signature.
A. Nearly Comprehensive and Retroactive Ban on Noncompete Agreements
If HB 1155 is signed into law, all noncompetition covenants, regardless of when they were executed, would be void and unenforceable as of June 30, 2027. Employers would be prohibited from entering into, enforcing, or even representing that a worker is subject to a noncompete. The law would apply to employees, independent contractors, and performers, closing prior wage-based and industry exemptions.
The bill plainly applies to and would render void all noncompetes entered into before, as well as on or after, June 30, 2027, that do not satisfy its limits. The bill also broadens the definition of “noncompetition covenant” to include agreements that require an employee or contractor to repay compensation as a consequence of leaving to work for another employer. These repayment-trigger provisions would be void as of June 30, 2027, unless they meet the narrow exception for bona fide educational expense reimbursement agreements.
B. Limited Customer and Personnel Nonsolicitation Agreements Remain Enforceable
The bill does not prohibit employers from restricting former employees from soliciting (a) personnel and (b) for up to 18 months, customers, both current and prospective, with which the employee had a direct relationship. A customer nonsolicit that restricts the former employee from “accepting” or “transacting” business with the employer’s customers would be void.
C. Written Notice Requirement
By October 1, 2027, employers would need to make “reasonable efforts” to notify, in writing, all current and former workers whose noncompetes remain within their effective period that such agreements are void and unenforceable.
D. Enforcement Risks
HB 1155 vests the Washington attorney general with authority to investigate and enforce the law. In addition, aggrieved employees would be able to bring civil claims to recover the greater of their actual damages or $5,000, plus attorneys’ fees and costs. Actual damages may include, for example, losses arising from forgoing job opportunities in deference to a noncompete that is void under the new law.
E. Sale-of-Business Exception
Like California law, HB 1155 would exempt and preserve certain “sale-of-business” noncompetes, specifically in connection with the purchase or sale of the goodwill of a business or otherwise the acquisition or disposition of an ownership interest, but only if the person subject to the noncompete purchases, sells, acquires, or disposes of an ownership interest representing 1% or more of the business. Agreements failing that test would be void, retroactively and prospectively, under the bill.
HB 1155 closely mirrors California’s comprehensive noncompete ban under Business and Professions Code § 16600, et seq, and its recently enacted “stay or pay” ban law, Assembly Bill (AB) 692. However, HB 1155 is materially more restrictive than AB 692, which preserves a California employer’s ability to clawback/demand repayment of certain signing bonuses and other such payments entered into at the outset of employment, where precise conditions regarding such clawbacks are met and conveyed in writing to the employee. HB 1155 would bar any agreement that requires an employee to return, repay, or forfeit any right, benefit, or compensation, as a consequence of the individual leaving to work for another employer. The full scope of HB 1155’s “stay or pay” ban is not entirely clear, but as currently drafted, the prohibition is extremely broad.
If signed, Washington will join California and a growing number of states in banning noncompetition covenants outright.
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