Washington Bans Noncompetition Covenants: What Physicians Need to Know

On March 9, the Washington State Legislature passed Engrossed Substitute House Bill 1155 (ESHB 1155), which was signed into law on March 23 by Gov. Bob Ferguson and will take effect June 30, 2027. The new law will ban virtually all noncompetition covenants for Washington-based workers, joining our state with California, Minnesota, North Dakota, and Oklahoma as states that prohibit nearly all noncompetition agreements. 

From Regulation to Prohibition 

When I previously wrote about Washington’s noncompetition statute—after its original enactment in 2019, in 2020 as its effects took shape, and again after the 2024 amendments—the law’s approach was to regulate noncompetition covenants: restricting their use for lower-wage workers, limiting duration, requiring disclosure, and imposing penalties for overly broad restrictions. Employers who followed the rules could still enforce reasonable noncompetes against higher-earning employees, including most physicians. 

ESHB 1155 replaces regulation with prohibition. When it goes into effect in 2027, all noncompetition covenants are void and unenforceable, regardless of when the parties entered into the agreement. The earnings thresholds, the 18-month duration presumption, the disclosure requirements, and the layoff garden-leave provision are all eliminated. In 2027, it will be a violation of Chapter 49.62 RCW for an employer to enforce, attempt to enforce, or threaten to enforce a noncompetition covenant, to represent that a worker is subject to one, or to enter into one. 

Key Changes for Physicians 

• Expanded definition of noncompetition covenant. The statute now covers “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.” This expansion targets provisions that condition repayment obligations on whether the departing worker competes. However, most physician employment agreements require repayment of signing bonuses, relocation expenses, or loan forgiveness if the physician leaves before a specified period of employment regardless of whether the physician competes. These duration-based repayment provisions, because they are not triggered by competition, should be unaffected by the new law. Employers and physicians should carefully review their agreements to determine whether any repayment obligation is tied to competitive activity—and therefore potentially void—or tied solely to length of service. 

• Narrow educational expense exception. The law carves out an exception for written agreements requiring repayment of out-of-pocket educational expenses, but only if the agreement (A) expires within 18 months of the employee’s start date, (B) limits repayment to the pro rata portion of the remaining 18-month period, and (C) releases the employee if separation is based on “good cause” under RCW 50.20.050. This exception does not cover signing bonuses, relocation costs, or other compensation. 

• Nonsolicitation agreements redefined. Nonsolicitation agreements remain permissible but are further constrained. A customer nonsolicitation provision is valid only if the employee “established or substantially developed a direct relationship” with the customer, patient, or client through the employee’s work, and the restriction expires within 18 months. Critically, an agreement that prohibits the acceptance of business—rather than active solicitation—is a noncompetition covenant and is void. For physicians, this means an employer may restrict a departing physician from actively recruiting patients, but may not prevent the physician from treating patients who independently seek care at the physician’s new practice. 

• Employer notice obligation. By Oct. 1, 2027, employers must make reasonable efforts to notify all current and former employees and independent contractors whose noncompetition covenants are still within their effective time period that their covenants are void and unenforceable. 

• Remedies. A person aggrieved by a violation may recover the greater of actual damages or a $5,000 statutory penalty, plus attorneys’ fees and costs. Merely representing that a worker is bound by a noncompete is a violation. 

• Sale-of-business exception preserved. The exception for covenants entered into by persons purchasing or selling a 1 percent-or-greater ownership interest in a business survives. Physicians selling their practices may still agree to reasonable noncompetition restrictions as part of the transaction. 

What Physicians and Medical Groups Should Do Now 

Employers should review all physician employment agreements and independent contractor agreements for noncompetition covenants, including forfeiture-for-competition provisions. Template agreements should be updated, nonsolicitation provisions should be evaluated for compliance, and written notices should be prepared for delivery before Oct. 1, 2027. Physicians currently subject to noncompetes should understand that as of June 30, 2027, those covenants are void and unenforceable, and any attempt to enforce them creates a cause of action. 

ESHB 1155 has been sent to Gov. Ferguson for signature. The Legislature’s message is clear: Washington is done regulating noncompetition covenants—it’s prohibiting them.