SSB 5437
In CommitteeSenate
Noncompetition agreements
Prohibiting noncompetition agreements and clarifying nonsolicitation agreements.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill bans most noncompetition agreements in Washington State, making them void and unenforceable for most workers regardless of when signed. It allows narrow exceptions only for high-earning employees and under strict conditions, and preserves limited use of nonsolicitation agreements. Employers must notify workers by October 1, 2025, that old agreements are no longer valid.
- All noncompetition agreements are void and unenforceable for most employees and independent contractors, regardless of when signed.
- Noncompetition agreements are only potentially enforceable if: (1) the employee earns over $100,000/year (adjusted annually), (2) the terms were disclosed in writing before the job offer, and (3) for laid-off workers, the employer pays full salary during the restriction period minus any new earnings.
- Courts will presume any noncompetition term over 18 months is unreasonable, and the employer must prove by clear and convincing evidence that a longer term is necessary.
- Employers must provide written notice to current and former employees and independent contractors by October 1, 2025, confirming that noncompetition agreements are void.
- Nonsolicitation agreements (e.g., banning employees from poaching coworkers or customers) are still allowed but must be narrowly defined and cannot block all business with customers.
- Employees or independent contractors harmed by violations can sue for at least $5,000 in statutory damages (plus attorney fees), even if no actual harm is proven.
Who is affected
- Employees and independent contractors — Employees earning less than $100,000 per year (annualized) are no longer subject to noncompetition agreements; those earning more may still be subject only under strict conditions.
- Employers — Must provide written notice to current and former employees and independent contractors by October 1, 2025, stating that existing noncompetition agreements are void and unenforceable.
- Employers and franchisors — May no longer enforce, threaten to enforce, or require employees to sign noncompetition agreements that violate the new rules.
- Employees and independent contractors — Can sue for violations and recover at least $5,000 in statutory damages (plus attorney fees) if an employer wrongfully enforces a prohibited agreement.
- Franchisees and franchisors — Must ensure franchise agreements comply with new rules; certain franchise-specific covenants may still be allowed under narrow conditions.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
Workers earning under $100,000/year gain full freedom to change jobs, start new ventures, or join competitors without legal restraint—dramatically increasing labor mobility and bargaining power.
Business & EmploymentPeopleRef: Sec. 3(1)Workers can sue for at least $5,000 in statutory damages (plus attorney fees) even if no actual harm is proven, creating a strong deterrent against employer overreach and empowering workers to challenge unlawful agreements.
Rights & LibertiesPeopleRef: Sec. 4(2)Mandatory advance disclosure of noncompetition terms before job offers ensures informed consent and prevents surprise enforcement, especially for lower-wage workers who may not understand contractual implications.
Business & EmploymentPeopleRef: Sec. 3(1)(a)The October 1, 2025 notice requirement retroactively invalidates old agreements, freeing workers who signed agreements years ago—particularly those in low- and middle-wage jobs—who were previously bound by restrictive covenants.
Business & EmploymentPeopleRef: Sec. 3(3)By emphasizing workforce mobility as essential to economic growth, the bill supports dynamic labor markets, potentially increasing regional innovation and wage growth through better job matching.
Business & EmploymentPeopleRef: Sec. 1
Potential Concerns (5)
Employers lose the ability to protect legitimate business interests (e.g., trade secrets, customer relationships) for most workers, potentially increasing turnover and requiring more investment in training and retention strategies.
Business & EmploymentRef: Sec. 3(1)Employers must bear administrative costs of providing written notice to all current and former employees and independent contractors by October 1, 2025, including legal review and documentation updates.
Business & EmploymentPeopleRef: Sec. 3(3)Employers face significant liability exposure: statutory damages of at least $5,000 per violation (plus attorney fees) even without proof of actual harm, and retroactive application increases exposure for past agreements.
Business & EmploymentPeopleRef: Sec. 4(2)Layoffs involving noncompetition enforcement now require employers to pay full salary during the restriction period minus new earnings, increasing severance and operational costs for businesses undergoing restructuring.
Business & EmploymentPeopleRef: Sec. 3(1)(c)The 18-month duration presumption and clear-and-convincing-evidence burden may increase litigation complexity and legal costs for employers seeking to enforce agreements for high-earning employees.
Business & EmploymentRef: Sec. 3(2)
Who Is Most Affected
Workers earning under $100,000/year gain the most: they are freed from noncompetition agreements that previously limited job mobility and wage bargaining. This is overwhelmingly positive, especially for hourly, salaried non-exempt, and many salaried exempt workers.
High-earning professionals (e.g., executives, senior engineers, sales VPs) may still be subject to noncompetition agreements—but only under strict conditions. While some lose full freedom, they retain limited protection for legitimate employer interests, making the net impact mixed but generally favorable due to transparency and severance requirements.
Small and mid-sized employers face compliance costs (notices, legal reviews) and increased liability risk, but benefit from reduced enforcement uncertainty and may gain from improved employee retention through better working conditions rather than legal restraints. Large employers face higher exposure due to volume of agreements and may shift toward higher base pay to retain talent, indirectly benefiting workers.
Franchisees may be especially burdened: franchise agreements often include noncompetes, and the bill’s exceptions for franchise covenants are narrow and conditional. Franchisors may face increased legal risk and may revise contract templates, potentially raising costs for franchisees.
Independent contractors (e.g., gig workers, consultants, freelancers) are explicitly included in the ban, freeing them from restrictive covenants that previously limited their ability to serve multiple clients or start competing businesses. This is a major win for gig and freelance economy workers.