Washington Noncompete Law: $126,858.83 Threshold in 2026 and the Full Ban on June 30, 2027
Washington Noncompete Law: $126,858.83 Threshold in 2026 and the Full Ban on June 30, 2027
If you hire employees or pay independent contractors in Washington, the noncompete rules that apply to you are about to change. Under chapter 49.62 RCW, a noncompetition covenant is allowed only for workers and contractors above set pay levels. That exception ends on June 30, 2027, when Engrossed Substitute House Bill 1155 makes every noncompete void. This guide covers the 2026 figures, the new ban, the arrangements that survive it, and the steps to take before the deadlines.
Informational note: This guide is general information, not legal or tax advice. Whether a particular covenant is enforceable depends on its exact wording and the facts of the job or contract. Talk with a qualified Washington employment attorney before you sign, enforce, or challenge a noncompete, and ask a certified public accountant (CPA) about any tax questions that come with paying a contractor.
What a noncompete is
A noncompetition covenant is a contract term that keeps a worker or contractor from competing with a business after the relationship ends. Common versions bar someone from taking a job with a competitor or starting a similar business within a set area or time period. Noncompetes usually appear in offer letters, employment agreements, and independent contractor agreements. They are not filed with the Secretary of State, so the signed document is the only record that one exists.
The 2026 thresholds under current law
Until June 29, 2027, chapter 49.62 RCW allows a noncompete only when the worker or contractor is paid above these levels in 2026:
- Employees: earning above $126,858.83 in 2026.
- Independent contractors: earning above $317,147.09 in 2026.
Below these levels, a noncompete is not allowed under current law. The Department of Labor and Industries (L&I) adjusts both figures every year, so the numbers that apply before June 30, 2027 may differ from the 2026 figures. Confirm the current amounts with L&I before you rely on them.
Here is how the thresholds work in practice:
- An employee earning $120,000 in 2026 is below the employee threshold, so a noncompete in that person's agreement is not permitted under current law.
- An employee earning $130,000 in 2026 is above the employee threshold. A noncompete may be permitted for that person, but the wording still has to fit the statute.
- A contractor paid $300,000 in 2026 is below the contractor threshold, so a covenant is not permitted.
- A contractor paid $350,000 in 2026 is above the contractor threshold, so a covenant may be permitted.
Pay can be harder to measure than a salary. Confirm with L&I or an attorney how earnings are counted when pay includes bonuses, commissions, or a mix of salary and contract fees.
Key dates
| Date | What happens |
|---|---|
| March 23, 2026 | ESHB 1155 (Chapter 149, Laws of 2026) is signed. |
| Through June 29, 2027 | Current rules and the 2026 thresholds still apply. |
| June 30, 2027 | ESHB 1155 takes effect. All noncompetition covenants become void and unenforceable, and the dollar thresholds are repealed. |
| October 1, 2027 | Deadline for employers to make reasonable efforts to give written notice to current and former employees and independent contractors whose covenant is still in effect. |
What the full ban prohibits
Starting June 30, 2027, ESHB 1155 makes every noncompetition covenant void and unenforceable, regardless of when it was signed. A noncompete signed years ago and one signed the week before the deadline are treated the same way. Employers may not:
- Enforce a noncompetition covenant.
- Threaten to enforce one.
- Enter into a new noncompetition covenant.
What survives the ban
The bill keeps a few narrower arrangements outside the ban. Each one has its own limits, so check the exact contract language with counsel:
- Customer nonsolicitation: a clause barring a worker from soliciting customers with whom the business has a direct relationship remains valid for up to 18 months. This is narrower than a noncompete because it limits who the worker can pursue, not where the worker can work.
- Ownership sales: a covenant tied to selling or buying an ownership interest of 1 percent or larger.
- Franchisee covenants: certain covenants in franchise relationships.
- Education repayment: a pro-rated education repayment agreement of 18 months or less.
Do not assume a clause qualifies because it has a similar label. A nonsolicitation clause that reaches beyond customers with a direct relationship, or a repayment term longer than 18 months, may not fit the carve-outs.
The October 1, 2027 notice requirement
By October 1, 2027, employers must make reasonable efforts to give written notice to current and former employees and independent contractors whose covenant is still in effect. The notice requirement applies to employers, so it is the business that must act, even when the worker has left the company. Ask counsel what reasonable efforts requires in your situation, particularly for former workers you cannot easily reach. A practical approach:
- List every current and former employee and contractor who signed a noncompete.
- Record the last known mailing address and email address for each person.
- Send written notice and keep copies, delivery records, and returned mail.
- Document each follow-up attempt for anyone who does not respond or cannot be located.
Penalties for violations
Under the new law, a violator owes the greater of actual damages or $5,000, plus attorney fees. The $5,000 floor applies even when actual damages are small, so the exposure is real even for a modest contract. Review every template and every enforcement decision before June 30, 2027.
Action checklist for employers
- Inventory every noncompete for employees and contractors, with the signing date, the person's role, and their pay or contract value.
- Compare each person's pay or contract value with the 2026 thresholds. Under current law, do not sign a noncompete with anyone below the applicable level.
- Mark which clauses might fit a carve-out: customer nonsolicitation, ownership sale, franchisee covenant, or pro-rated education repayment.
- Work with counsel on which clauses can be replaced with lawful terms and which must be dropped on June 30, 2027.
- Prepare the notice letters and a delivery log for the October 1, 2027 deadline.
- Update offer letter and contractor templates so new agreements do not include void terms after June 30, 2027.
Action checklist for workers and contractors
- Find your signed agreement and look for noncompete language in the contract, the offer letter, or any attached documents.
- Compare your 2026 pay or contract value with the thresholds above.
- Note June 30, 2027. A noncompete still in your contract becomes void on that date, no matter when you signed it.
- Watch for written notice by October 1, 2027. If you signed a covenant and have not heard from your employer, ask in writing whether it is still in effect.
- Check whether the clause is only a customer nonsolicitation term. If so, it may last up to 18 months under the bill.
- Get legal advice quickly if an employer threatens to enforce a noncompete. After June 30, 2027, the threat itself is prohibited.
Frequently asked questions
Does the ban apply to agreements signed before June 30, 2027?
Yes. ESHB 1155 voids all noncompetition covenants regardless of when they were signed.
Do the dollar thresholds matter after June 30, 2027?
No. The bill repeals the thresholds along with the exception they support.
Is a nonsolicitation clause the same as a noncompete?
No. A customer nonsolicitation clause limited to customers with a direct relationship may remain valid for up to 18 months. Whether a specific clause qualifies is a question for an attorney.
Where do I find the current threshold amounts?
L&I adjusts the figures each year. Check L&I directly for the amounts in effect on the date you need them.
Resources
- Chapter 49.62 RCW: the current noncompete statute. Search for it on the Washington State Legislature website.
- Engrossed Substitute House Bill 1155 (Chapter 149, Laws of 2026): the enacted text that voids noncompetes on June 30, 2027. Search the Legislature website for the bill number to read the full language.
- Department of Labor and Industries (L&I): the agency that publishes the annual threshold adjustments.
- Washington Small Business Development Center (WSBDC): https://wsbdc.org/. Useful for business planning and advising support as you update your agreements.
- Washington Secretary of State, Corporations and Charities Division: https://www.sos.wa.gov/corporations-charities. Use it for questions about entity formation and filings, which are separate from employment agreements.
Noncompete rules are a contract issue as much as a statute issue. Before you change templates or enforce a covenant, have a qualified Washington attorney review the specific agreement, and ask a CPA how contractor payments affect your tax position.