Chapter 49.62 RCW

The legislature finds that:

(1) Workforce mobility is important to economic growth and development;

(2) Agreements limiting competition or hiring may be contracts of adhesion that may be unreasonable; and

(3) The provisions in this chapter facilitating workforce mobility and protecting employees and independent contractors need to be liberally construed and exceptions narrowly construed.

The legislature finds that:

(1) Workforce mobility is important to economic growth and development;

(2) Agreements limiting competition or hiring restrain trade and commerce and may be contracts of adhesion that may be unreasonable; and

(3) The provisions in this chapter facilitating workforce mobility and protecting employees and independent contractors must be liberally construed and exceptions narrowly construed. In addition, nonsolicitation agreements, which prohibit an employee from actively soliciting current customers or employees away from the employer, are not prohibited; however, the definition of nonsolicitation agreement must be narrowly construed.

Intent—Finding—2026 c 149: "(1) The legislature finds that noncompetition covenants hinder innovation and entrepreneurship, suppress wages, reduce job mobility, and ultimately harm consumers and the economy. In 2019 the legislature took a critical step forward by banning the use of noncompetition covenants for lower-wage earners. This did not go far enough. Research shows that noncompetition covenants restrict workers' mobility, impede efforts to correct inequities, and significantly suppress workers' wages across all sectors, including for those not subject to covenants, or subject to covenants that are unenforceable under state law. Even among supposed high-wage earners, the suggestion that these covenants are bargained is largely a legal fiction. Noncompetition covenants are often unilaterally imposed by employers and businesses without meaningful negotiation. Businesses have more specific and effective legal means to protect intellectual property, trade secrets, and clients without harming workers, contractors, and the public.

(2) The evidence is clear. Banning noncompetition covenants will incentivize innovation and entrepreneurship, increase wages, and even reduce health care costs. To that end, in 2024 the federal trade commission adopted rules banning noncompetition covenants nationwide. Unfortunately, those rules have not been fully implemented. Washington's workers and businesses should not have to wait years for federal court rulings on a nationwide ban when the state has the authority to extend these protections.

(3) The legislature hereby intends to ban noncompetition covenants for all Washington-based workers and businesses. Yet the legislature recognizes the limitations of a state ban. Workers in all jurisdictions need these same protections. But other states may be slow to act or will not act despite compelling economic interests. The state also does not intend for this act to modify or interfere with the sovereignty of tribal nations or with their exclusive jurisdiction to govern employment standards for employees working in Indian country for a business owned by a federally recognized tribe or tribal member. By joining other states that have banned noncompetition covenants, Washington will demonstrate the benefits to other states, tribes, and jurisdictions. Let the actions of this legislature to improve prosperity for all pave the way for the nation." [ 2026 c 149 s 1.]

Effective date—2026 c 149: "This act takes effect June 30, 2027." [ 2026 c 149 s 9.]

The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.

(1) "Earnings" means the compensation reflected on box one of the employee's United States internal revenue service form W-2 that is paid to an employee over the prior year, or portion thereof for which the employee was employed, annualized and calculated as of the earlier of the date enforcement of the noncompetition covenant is sought or the date of separation from employment. "Earnings" also means payments reported on internal revenue service form 1099-MISC for independent contractors.

(2) "Employee" and "employer" have the same meanings as in RCW 49.17.020.

(3) "Franchisor" and "franchisee" have the same meanings as in RCW 19.100.010.

(4) "Noncompetition covenant" includes every written or oral covenant, agreement, or contract by which an employee or independent contractor is prohibited or restrained from engaging in a lawful profession, trade, or business of any kind. A "noncompetition covenant" also includes an agreement that directly or indirectly prohibits the acceptance or transaction of business with a customer. A "noncompetition covenant" does not include: (a) A nonsolicitation agreement; (b) a confidentiality agreement; (c) a covenant prohibiting use or disclosure of trade secrets or inventions; (d) a covenant entered into by a person purchasing or selling the goodwill of a business or otherwise acquiring or disposing of an ownership interest, but only if the person signing the covenant purchases, sells, acquires, or disposes of an interest representing one percent or more of the business; or (e) a covenant entered into by a franchisee when the franchise sale complies with RCW 19.100.020(1).

(5) "Nonsolicitation agreement" means an agreement between an employer and employee that prohibits solicitation by an employee, upon termination of employment: (a) Of any employee of the employer to leave the employer; or (b) of any current customer of the employer to cease or reduce the extent to which it is doing business with the employer.

(6) "Party seeking enforcement" means the named plaintiff or claimant in a proceeding to enforce a noncompetition covenant or the defendant in an action for declaratory relief.

The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.

(1) "Employee" and "employer" have the same meanings as in RCW 49.17.020.

(2) "Franchisor" and "franchisee" have the same meanings as in RCW 19.100.010.

(3)(a) "Noncompetition covenant" includes every written or oral covenant, agreement, or contract that prohibits or restrains an employee or independent contractor from engaging in a lawful profession, trade, or business of any kind.

(b) "A noncompetition covenant" also includes a covenant, agreement, or contract between a performer and a performance space, or a third party scheduling the performer for a performance space, that prohibits or restrains the performer from engaging in a lawful performance.

(c) A "noncompetition covenant" also includes an agreement that directly or indirectly prohibits the acceptance or transaction of business with a customer.

(d) A "noncompetition covenant" also includes any provision in an agreement that threatens, demands, requires, or otherwise effectuates that an individual return, repay, or forfeit any right, benefit, or compensation, as a consequence of the individual engaging in a lawful profession, trade, or business of any kind.

(e) A "noncompetition covenant" does not include: (i) A nonsolicitation agreement; (ii) a confidentiality agreement; (iii) a covenant prohibiting use or disclosure of trade secrets or inventions; (iv) a covenant entered into by a person purchasing or selling the goodwill of a business or otherwise acquiring or disposing of an ownership interest, but only if the person signing the covenant purchases, sells, acquires, or disposes of an ownership interest representing one percent or more of the business; (v) a covenant entered into by a franchisee when the franchise sale complies with RCW 19.100.020(1); or (vi) a written agreement to repay out-of-pocket educational expenses if the agreement: (A) Expires within 18 months of the employee's start date for employment; (B) limits repayment to the pro rata portion of the remaining time of the 18-month period; and (C) releases the employee from the obligation to repay if the employee's separation from employment is based on "good cause" under RCW 50.20.050.

(4) "Nonsolicitation agreement" means an agreement between an employer and employee that prohibits solicitation by an employee, upon termination of employment: (a) Of any employee of the employer to leave the employer; or (b) of any current or prospective customer, patient, or client of the employer to shift business away from *with [((with))] the employer if the employee established or substantially developed a direct relationship with the customer, patient, client, or prospect through the employee's work for the employer and the prohibition expires no later than 18 months following termination of employment. An agreement that directly or indirectly prohibits the acceptance or transaction of business with a customer, patient, or client is not a "nonsolicitation agreement."

(5) "Party seeking enforcement" means the named plaintiff or claimant in a proceeding to enforce a noncompetition covenant or the defendant in an action for declaratory relief.

*Reviser's note: The word "with" was apparently not removed in 2026 c 149 s 3 in error.

Intent—Finding—Effective date—2026 c 149: See notes following RCW 49.62.005.

(1) A noncompetition covenant is void and unenforceable:

(a)(i) Unless the employer discloses the terms of the covenant in writing to the prospective employee no later than the time of the initial oral or written acceptance of the offer of employment and, if the agreement becomes enforceable only at a later date due to changes in the employee's compensation, the employer specifically discloses that the agreement may be enforceable against the employee in the future; or

(ii) If the covenant is entered into after the commencement of employment, unless the employer provides independent consideration for the covenant;

(b) Unless the employee's earnings from the party seeking enforcement, when annualized, exceed one hundred thousand dollars per year. This dollar amount must be adjusted annually in accordance with RCW 49.62.040;

(c) If the employee is terminated as the result of a layoff, unless enforcement of the noncompetition covenant includes compensation equivalent to the employee's base salary at the time of termination for the period of enforcement minus compensation earned through subsequent employment during the period of enforcement.

(2) A court or arbitrator must presume that any noncompetition covenant with a duration exceeding eighteen months after termination of employment is unreasonable and unenforceable. A party seeking enforcement may rebut the presumption by proving by clear and convincing evidence that a duration longer than eighteen months is necessary to protect the party's business or goodwill.

(1) Beginning on June 30, 2027, all noncompetition covenants are void and unenforceable regardless of when the parties entered into the noncompetition covenant.

(2) It is a violation of this chapter for an employer to enforce, attempt to enforce, or threaten to enforce against an employee or worker any noncompetition covenant, to represent that the employee or worker is subject to a noncompetition covenant, or to enter into or attempt to enter into a noncompetition covenant with an employee or worker.

(3) By October 1, 2027, an employer must make reasonable efforts to provide written notice to all current and former employees and independent contractors whose noncompetition covenant is still within its effective time period, that their noncompetition covenant is void and unenforceable.

Intent—Finding—Effective date—2026 c 149: See notes following RCW 49.62.005.

(1) A noncompetition covenant is void and unenforceable against an independent contractor unless the independent contractor's earnings from the party seeking enforcement exceed two hundred fifty thousand dollars per year. This dollar amount must be adjusted annually in accordance with RCW 49.62.040.

(2) The duration of a noncompetition covenant between a performer and a performance space, or a third party scheduling the performer for a performance space, must not exceed three calendar days.

The dollar amounts specified in RCW 49.62.020 and 49.62.030 must be adjusted annually for inflation. Annually on September 30th the department of labor and industries must adjust the dollar amounts specified in this section by calculating to the nearest cent using the consumer price index for urban wage earners and clerical workers, CPI-W, or a successor index, for the twelve months prior to each September 1st as calculated by the United States department of labor. The adjusted dollar amount calculated under this section takes effect on the following January 1st.

A provision in a noncompetition covenant signed by an employee or independent contractor who is Washington-based is void and unenforceable:

(1) If the covenant requires the employee or independent contractor to adjudicate a noncompetition covenant outside of this state;

(2) To the extent it deprives the employee or independent contractor of the protections or benefits of this chapter; or

(3) If it allows or requires the application of choice of law principles or the substantive law of any jurisdiction other than Washington state.

(1) No franchisor may restrict, restrain, or prohibit in any way a franchisee from soliciting or hiring any employee of a franchisee of the same franchisor.

(2) No franchisor may restrict, restrain, or prohibit in any way a franchisee from soliciting or hiring any employee of the franchisor.

(1) Subject to subsection (2) of this section, an employer may not restrict, restrain, or prohibit an employee earning less than twice the applicable state minimum hourly wage from having an additional job, supplementing their income by working for another employer, working as an independent contractor, or being self-employed.

(2)(a) This section shall not apply to any such additional services when the specific services to be offered by the employee raise issues of safety for the employee, coworkers, or the public, or interfere with the reasonable and normal scheduling expectations of the employer.

(b) This section does not alter the obligations of an employee to an employer under existing law, including the common law duty of loyalty and laws preventing conflicts of interest and any corresponding policies addressing such obligations.

(1) Upon a violation of this chapter, the attorney general, on behalf of a person or persons, may pursue any and all relief. A person aggrieved by a noncompetition covenant may bring a cause of action to pursue any and all relief provided for in subsections (2) and (3) of this section.

(2) If a court or arbitrator determines that a noncompetition covenant violates this chapter, the violator must pay the aggrieved person the greater of his or her actual damages or a statutory penalty of five thousand dollars, plus reasonable attorneys' fees, expenses, and costs incurred in the proceeding.

(3) If a court or arbitrator reforms, rewrites, modifies, or only partially enforces any noncompetition covenant, the party seeking enforcement must pay the aggrieved person the greater of his or her actual damages or a statutory penalty of five thousand dollars, plus reasonable attorneys' fees, expenses, and costs incurred in the proceeding.

(4) A cause of action may not be brought regarding a noncompetition covenant signed prior to January 1, 2020, if the noncompetition covenant is not being enforced or explicitly leveraged.

(1) Upon a violation of this chapter, the attorney general, on behalf of a person or persons, may pursue any and all relief. A person aggrieved by a violation of this chapter may bring a cause of action to pursue any and all relief provided for in subsection (2) of this section.

(2) If a court or arbitrator determines that a person has violated this chapter, the violator must pay the aggrieved person the greater of his or her actual damages or a statutory penalty of five thousand dollars, plus reasonable attorneys' fees, expenses, and costs incurred in the proceeding.

Intent—Finding—Effective date—2026 c 149: See notes following RCW 49.62.005.

(1)(a) Subject to (b) of this subsection, this chapter displaces conflicting tort, restitutionary, contract, including contract principles relating to discharge by assent or alteration, and other laws of this state pertaining to liability for competition by employees or independent contractors with their employers or principals, as appropriate.

(b) This chapter does not amend or modify chapter 19.108 RCW.

(2) Except as otherwise provided in this chapter, this chapter does not revoke, modify, or impede the development of the common law.

(1) Subject to subsection (2) of this section, this chapter displaces conflicting tort, restitutionary, contract, including contract principles relating to discharge by assent or alteration, and other laws of this state pertaining to liability for competition by employees or independent contractors with their employers or principals, as appropriate.

(2) This chapter does not amend or modify chapter 19.108 RCW.

Intent—Finding—Effective date—2026 c 149: See notes following RCW 49.62.005.

This chapter applies to all proceedings commenced on or after January 1, 2020, regardless of when the cause of action arose. To this extent, this chapter applies retroactively, but in all other respects it applies prospectively.

(1) RCW 49.62.010, 49.62.020, 49.62.080, and 49.62.090 apply to all proceedings commenced on or after June 30, 2027, regardless of when the cause of action arose.

(2) Legal proceedings commenced before June 30, 2027, will be governed by this chapter as amended prior to June 30, 2027.

Intent—Finding—Effective date—2026 c 149: See notes following RCW 49.62.005.

This chapter is an exercise of the state's police power and shall be construed liberally for the accomplishment of its purposes.

This act takes effect January 1, 2020.