Washington Voids Nearly Every Noncompete June 30, 2027 — A $5,000-Per-Violation Risk

If you employ anyone in Washington state, a clock is running on every noncompete you have ever handed out. On June 30, 2027, Washington's new law, House Bill 1155, makes virtually all of them void and unenforceable, including agreements your workers signed years ago. Employers who try to enforce one, or even tell a worker they are bound by one, can owe the greater of actual damages or $5,000 per violation, plus attorneys' fees.

Governor Bob Ferguson signed the bill on March 23, 2026, according to law firm Faegre Drinker. This month, Arnold & Porter published a practical audit guide for employers ahead of the deadline. Here is what small business owners need to know, and what to do before mid-2027.

What Changes on June 30, 2027

Until that date, Washington's existing law (RCW 49.62) lets employers enforce noncompetes only for workers above certain income thresholds. On June 30, 2027, that threshold approach ends. All noncompetition covenants become void and unenforceable, regardless of when they were signed, how much the worker earns, or how long the restriction lasts.

The law covers employees, independent contractors, and "performers" as the statute defines them. If you rely on 1099 workers, this is not just an employee issue. For more on how the two categories differ, see our guide on independent contractor vs employee.

Starting that day, an employer may not:

• Enter into a noncompetition covenant with a covered worker.
• Enforce, attempt to enforce, or threaten to enforce one, including older agreements.
• Represent to a worker that they are bound by one.

That last item matters for everyday conversations. A manager who reminds a departing employee, "you can't work for a competitor," could be creating a violation.

It Reaches Further Than a Classic Noncompete

The definition is broad. Besides traditional "you can't work for a competitor" clauses, the law targets two other types of restriction:

• Customer "no-accept" provisions. Clauses that directly or indirectly bar a worker from accepting business from a customer.
• Forfeiture-for-competition provisions. Terms that require a worker to repay or forfeit a benefit for engaging in a lawful trade or business.

Faegre Drinker notes that the forfeiture language could reach bonus repayment, clawbacks, and "stay or pay" arrangements. Arnold & Porter says clawbacks, equity forfeiture for competing, and competition-triggered repayment obligations are squarely within the definition. The statute also directs courts to read the protections liberally and the exceptions narrowly.

In practical terms, a sign-on bonus that must be repaid if the employee goes to a competitor is the kind of term to review now, not in June 2027.

The Penalties: $5,000 Per Violation Plus Fees

Aggrieved workers can sue for the greater of actual damages or $5,000, plus reasonable attorneys' fees and costs. The state attorney general can also investigate and enforce the law. Arnold & Porter adds that the $5,000 penalty applies even if a court modifies an agreement to make it compliant, and it warns that class actions are likely.

For a ten-person shop with ten workers holding the same template agreement, per-violation math adds up quickly. That is why the audit step below matters more than it might seem for a small team.

What Still Works: The Exceptions

The ban is not total. According to the law firm summaries, these remain allowed:

• Confidentiality agreements.
• Covenants protecting trade secrets or inventions.
• Noncompetes tied to the sale of a business or its goodwill (Arnold & Porter says the signer must hold at least a 1% ownership interest).
• Certain franchise agreements.
• Nonsolicitation covenants limited to soliciting employees, or current or prospective customers with whom the worker built a direct relationship through their work. These must expire within 18 months after the worker's employment or engagement ends.
• Written agreements to repay out-of-pocket educational expenses, if the agreement expires within 18 months of the start date, limits repayment to the pro rata remaining portion, and releases the worker when the separation is for "good cause" under RCW 50.20.050.

Because the exceptions are read narrowly, a clause that loosely resembles one of these may not qualify. If you are relying on an exception, have an employment attorney confirm it.

Lawsuits Filed Before the Deadline

One detail changes strategy for employers with live disputes. Under both summaries, agreements that are the subject of litigation filed before June 30, 2027 remain governed by existing law. Arnold & Porter suggests that employers with significant violations by former workers consider filing claims before that date. That is a decision for you and your lawyer, not a default recommendation, but it shows why the calendar matters.

Your Notice Deadline: October 1, 2027

By October 1, 2027, employers must make "reasonable efforts" to notify current workers, and former workers whose restrictions would otherwise still be active, that those provisions are void and unenforceable. The statute does not define "reasonable efforts." Arnold & Porter suggests using traceable delivery, such as certified mail or registered email, and keeping documentation of your outreach. It also suggests sending notice soon after June 30 instead of waiting for the October date.

An Eight-Step Checklist for Small Employers

Arnold & Porter's advisory outlines these steps, which translate well to a small business:

1. Audit your paperwork. Look beyond the employment agreement. Check offer letters, bonus and equity documents, relocation and forgivable loans, separation agreements, and even offboarding scripts.
2. Draft compliant templates now. For hires before June 30, 2027, consider language that names the June 30, 2027 switch date expressly.
3. Restructure incentives. Consider paying sign-on bonuses over time rather than as advances, and using vesting rather than competition-based forfeiture. Changing the timing of existing payments may raise Section 409A tax issues, so involve your accountant.
4. Tighten nonsolicitation terms. Limit them to current or prospective customers the worker dealt with directly, capped at 18 months after termination.
5. Plan the notice process early. Build the mailing list of current and former workers and decide on the delivery method.
6. Train whoever hires and fires. Even attempting to enter into a covenant, or misrepresenting that one applies, can be a violation.
7. Review pending claims. If you have significant violations to pursue, speak to counsel before June 30, 2027.
8. Consider individual arbitration agreements. The advisory says these may reduce class-action exposure, though they do not remove the duty to comply.

How to Protect Your Business Without a Noncompete

Losing the noncompete does not leave you defenseless. Confidentiality agreements and trade-secret protections remain available, and a well-drafted 18-month nonsolicitation clause for customers a worker personally served is still permitted. Beyond contracts, owners often rely on practical retention: competitive pay, documented client handoffs, and keeping key customer relationships spread across more than one person.

Review your coverage, too. Employment disputes can be costly even when you win, and some owners look at employment practices coverage as part of their business insurance review. If you operate under an LLC, remember that the entity does not automatically shield you from every employment claim; see our overview of LLC formation for how liability protection works in general.

The Bottom Line for Washington Employers

You have roughly eight months before the ban takes effect and about eleven before the notice deadline. The audit is the real work: most small businesses do not know every place a restriction is hiding. Start by pulling every signed agreement and bonus letter into one folder, mark any term that restricts where a worker can go or repays money if they leave for a competitor, and bring that list to an employment attorney.

This article is for general information and is not legal advice. Summaries are based on published law firm analyses of HB 1155; consult an attorney about your specific agreements. Details may change before the effective date.

Photo by Scott Graham on Unsplash