Washington State’s New Noncompete Ban: Key Deadlines, Risks for Employers, and Compliance Next Steps

In March 2026, Washington State Legislature passed HB 1155, which will fully ban noncompete agreements for all employees effective June 30, 2027, joining other U.S. states that restrict such restrictive covenants. The law narrows enforceable non-solicitation agreement scope, only carves out an equity sale exception for noncompetes and expands their definition to cover compensation-related restrictions like bonus repayment.

It also sets steep penalties for noncompliance, imposing critical legal obligations on Washington employers and HR teams. Understanding HB 1155’s core rules, deadlines and risks is vital for businesses to avoid costly liability and align employment practices with the new statutory requirements.

If you have questions about agreement revisions, trade secret protection, non-solicitation agreement drafting under Washington State’s new noncompete ban, or U.S. state employment compliance and employment clause reviews, contact the ILS Legal Team at contact@consultils.com.

Core Provisions of HB 1155

HB 1155 overhauls Washington’s rules for restrictive employment covenants, with clear prohibitions, narrow exceptions, and revised standards for non-solicitation agreements. Key provisions include:

1. Near-Total Ban on Noncompete Agreements

HB 1155 prohibits noncompete agreements for all employees in Washington State. The only exception applies to agreements related to the sale or transfer of at least 1% of a business’s equity.

Notably, the law expands the definition of a noncompete clause to include any provision that results in the loss of an employee’s rights, benefits, or compensation. This broad definition invalidates employer agreements that require employees to repay bonuses, forfeit earned compensation, or surrender other financial benefits upon separation—terms that were previously common in many employment contracts.

2. Limited Exception for Reimbursement of Employee Education Expenses

HB 1155 permits limited agreements for the reimbursement of employer-paid education expenses, only if three strict conditions are met:

• The agreement expires within 18 months of the employee’s hire date;

• The reimbursement amount is prorated based on the remaining term of the 18-month period;

• The employee is exempt from reimbursement obligations if their separation is for good cause as defined under RCW 50.20.050 (Washington’s unemployment compensation statute).

3. Revised Rules for Enforceable Non-Solicitation Agreements

Non-solicitation agreements remain permitted under HB 1155, but the law tightens their scope and imposes mandatory requirements for enforceability. A valid non-solicitation agreement must only apply to existing and potential clients and satisfy two key conditions:

• The employee established or substantially developed a direct relationship with the client, patient, principal, or potential client through their work for the employer;

• The non-solicitation ban expires within 18 months of the termination of the employment relationship.

Critical caveat: Agreements that directly or indirectly prohibit an employee from accepting or conducting business with a client, patient, or principal do not qualify as valid non-solicitation agreements under HB 1155 and are unenforceable.

4. Severe Penalties for Noncompliance

Effective June 30, 2027, employers who engage in the following conduct will be deemed in violation of HB 1155 and subject to legal action:

• Enforcing or threatening to enforce a noncompete agreement;

• Falsely representing that an employee or worker is bound by a noncompete agreement;

• Entering into or attempting to enter into a noncompete agreement with an employee.

Violating employers are liable for the greater of the employee’s actual damages or a statutory penalty of $5,000, plus the employee’s reasonable attorney’s fees and court costs incurred in the litigation.

5. Retroactivity and Time-of-Filing Rule

HB 1155 is not retroactive for pending litigation: any lawsuit filed before June 30, 2027 will be governed by Washington’s existing noncompete laws. Only claims arising from conduct on or after the law’s effective date fall under HB 1155’s provisions and penalties.

Key Impacts of HB 1155 for Washington Employers

HB 1155 creates far-reaching changes for Washington businesses, affecting employment contract design, intellectual property and client protection, and HR operational workflows. Employers and HR teams must address four critical impacts:

1. All Existing Noncompete Agreements Will Become Unenforceable

After June 30, 2027, all noncompete agreements (excluding the equity sale exception) will be void and unenforceable in Washington. Businesses that have relied on noncompete clauses to protect trade secrets, proprietary business information, and core talent will need to rebuild their intellectual property protection frameworks—as noncompetes will no longer be a viable tool for limiting post-separation employment for any employee.

2. Employment Contract Provisions Require Urgent Revision

The law’s expanded definition of noncompete clauses invalidates common compensation-related restrictions, such as bonus repayment or compensation forfeiture terms. Employers with these provisions in existing employment, bonus, or severance agreements face legal and financial risk after June 30, 2027: employees may bring claims for violations, triggering statutory fines and damages.

3. Non-Solicitation Agreements Face Stricter Enforceability Standards

HB 1155’s narrow rules for non-solicitation agreements raise the bar for enforceability. Agreements that fail to limit scope to direct client relationships, exceed the 18-month post-termination period, or prohibit actual business transactions (rather than just solicitation) will be unenforceable. This increases the challenge of protecting core client and patient relationships—especially for client-centric industries such as professional services, healthcare, and technology.

4. Mandatory Written Notice Obligation for Current and Former Employees

HB 1155 imposes a critical written notice requirement on employers: by October 1, 2027, employers must use reasonable efforts to notify all current employees, former employees, and independent contractors with existing noncompete agreements that their noncompete agreements are void and unenforceable under the new law. Failure to comply with this notice obligation may expose employers to additional legal liability and claims from affected workers.

Washington Employer Compliance Guide

HB 1155 sets two non-negotiable compliance deadlines for Washington employers—June 30, 2027 (law effective date) and October 1, 2027 (notice obligation deadline). To ensure full compliance and minimize legal risk, employers should take phased, proactive action to align their employment practices with HB 1155:

1. Immediate Action (Now – June 30, 2027)

Revise employment agreements for all new hires to eliminate noncompliant provisions and align with HB 1155’s rules:

• Remove all noncompete clauses (with the only exception for equity sale-related agreements);

• Audit and refine education expense reimbursement provisions to meet the law’s three strict conditions (18-month expiration, prorated repayment, good cause exemption);

• Redraft non-solicitation agreements to limit scope to directly developed existing/potential clients, cap the post-termination period at 18 months, and avoid prohibitions on actual business transactions with clients.

2. Comprehensive Review (Now – June 30, 2027)

Conduct a full audit of all existing employment contracts, bonus agreements, and independent contractor agreements to identify and remediate noncompliant provisions:

• Create a detailed inventory of all agreements containing noncompete clauses, compensation-forfeiture terms, or non-solicitation provisions;

• Proactively negotiate amendments with current employees and contractors to remove invalid clauses or revise non-solicitation agreements to meet HB 1155’s enforceability standards;

• Document all audit and revision efforts to demonstrate good-faith compliance with the law.

3. Mandatory Written Notice (June 30, 2027 – October 1, 2027)

Fulfill the law’s written notice obligation for all current/former employees and contractors with existing noncompete agreements:

• Compile a complete list of all individuals bound by prior noncompete agreements, including current employees, former employees, and independent contractors;

• Issue a written notice (via traceable delivery methods: certified mail, electronic signature, or registered email) clearly stating that their noncompete agreement is void and unenforceable under HB 1155 effective June 30, 2027;

• Retain all proof of delivery and notice receipt to demonstrate compliance with the law’s notice requirement;

• For individuals with no traceable contact information, issue a public notice via the company website or other reasonable channels.

4. Long-Term Compliance (Ongoing)

Rebuild employment and IP protection frameworks to replace noncompete clauses and ensure sustained compliance with HB 1155:

• Strengthen trade secret and proprietary information protection through confidentiality agreements, restricted access to sensitive data, and formal offboarding processes for departing employees;

• Revise compensation and bonus programs to eliminate any forfeiture or repayment terms that fall under HB 1155’s expanded noncompete definition;

• Integrate HB 1155 compliance checks into standard HR workflows (onboarding, contract renewal, offboarding) to ensure all new agreements align with the law;

• Provide targeted training for leadership and HR teams on HB 1155’s rules, penalties, and enforceability standards to avoid accidental noncompliance.

  
  

If you have questions about agreement revisions, trade secret protection, non-solicitation agreement drafting under Washington State’s new noncompete ban, or U.S. state employment compliance and employment clause reviews, contact the ILS Legal Team at contact@consultils.com.

Disclaimer: The materials provided on this website are for general informational purposes only and do not, and are not intended to, constitute legal advice. You should not act or refrain from acting based on any information provided here. Please consult with your own legal counsel regarding your specific situation and legal questions.

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As Managing Partner at ILS, Richard Liu ranks among the leading U.S. attorneys in corporate, employment, and regulatory law. He is known for crafting legal strategies aligned with clients’ business objectives and advising Fortune 500 companies, startups, and executives on corporate transactions, financing, privacy, and employment matters across the technology, healthcare, and financial sectors.

Before founding ILS, Richard practiced at top defense firms, where he developed a reputation for anticipating risks and designing strategies that balance protection with growth. He has secured favorable outcomes in contract and intellectual property disputes, represented clients in state and federal courts, and is recognized for combining large-firm expertise with boutique-firm agility. Richard is also a frequent speaker at industry and legal conferences.

Email: contact@consultils.com | Phone: 626-344-8949