A significant change in Washington state law prohibits nearly all non-compete agreements, impacting employers and employees alike. Signed by Gov. Bob Ferguson on March 23, this legislation, known as House Bill 1155, will void existing agreements and prevent new ones from being formed, with few exceptions.
The law is set to take effect on June 30, 2027, and aims to facilitate job mobility and innovation, particularly benefiting startups. Critics, however, express concerns that the retroactive nature of the ban may be excessive, particularly as it eliminates current agreements that many businesses rely on.
Under the new rules, non-compete clauses will only be enforceable in specific situations, such as business sales involving ownership interests of 1% or more, or for educational expense reimbursements under certain conditions. Moreover, the legislation limits non-solicitation agreements to a maximum of 18 months and mandates that employers notify affected individuals by October 1, 2027, or face penalties starting at $5,000.
This development follows prior reforms in 2019 that restricted non-compete agreements for higher earners and reduced their duration, emphasizing Washington's ongoing efforts to reshape employment contract regulations.