AN ACT Relating to encouraging competition and economic growth by prohibiting noncompetition agreements and clarifying nonsolicitation agreements;
SB 5437 would broadly prohibit noncompetition agreements in Washington and narrow the circumstances under which nonsolicitation agreements may be used. The bill states a legislative finding that noncompete covenants suppress wages, reduce job mobility, hinder innovation and entrepreneurship, and harm consumers and the economy. It defines noncompetition covenants expansively to include agreements that restrict an employee, independent contractor, or performer from engaging in a lawful profession, trade, business, or performance, as well as certain customer-protection and forfeiture-type provisions tied to post-employment competition.
The bill makes most noncompetition covenants void and unenforceable unless specific conditions are met, including advance written disclosure, independent consideration for post-hire covenants, and earnings thresholds. It also creates special rules for layoffs, presumes covenants longer than 18 months are unreasonable unless proven necessary by clear and convincing evidence, and requires employers to notify covered workers that existing noncompetes are void and unenforceable. The measure also authorizes enforcement actions by the attorney general and private parties, and provides damages, statutory penalties, and attorney fees for violations. It repeals existing statutory provisions related to noncompetes for certain independent contractors and broadcasting employees, and it applies prospectively with some retroactive effect for proceedings commenced on or after the effective date.
The bill’s impact on state law would be significant: it would replace Washington’s existing framework with a much stricter statewide ban on noncompete clauses, while preserving narrow exceptions for confidentiality, trade secrets, certain business-sale covenants, and some franchise-related agreements. It would also clarify that nonsolicitation agreements are not themselves prohibited, but must be construed narrowly and cannot be used as a disguised restraint on lawful work or customer acceptance. Employers, franchisors, businesses, independent contractors, and workers would all be affected, especially in sectors that currently rely on post-employment restrictions.
The general sentiment reflected in the bill text and committee vote is strongly supportive of limiting noncompetes. The substitute bill passed the Senate Labor & Commerce Committee 5-4, indicating some division, but the bill’s findings and structure show a clear policy preference for worker mobility, wage growth, and competition. The bill also references federal FTC action as support for the policy change and suggests Washington should not wait for federal implementation.
The main points of contention are likely to be the breadth of the ban, the treatment of higher-paid workers, and the extent to which employers can still protect trade secrets, goodwill, and customer relationships. Opponents may argue that the bill goes too far by voiding many existing restraints and by imposing penalties on employers who attempt to enforce them, while supporters emphasize that noncompetes are often imposed without meaningful negotiation and suppress wages across the labor market. The carve-outs for business sales, franchises, confidentiality, and trade secrets suggest an effort to balance worker mobility with legitimate business protections.
SB 5437 would substantially amend Washington’s statutes governing restraints on trade by voiding most noncompetition covenants, narrowing permissible nonsolicitation and related restrictive covenants, and repealing certain existing provisions tied to independent contractors and broadcasting employees. It would create new definitions, enforcement standards, notice requirements, penalties, and presumptions of unenforceability that would affect employers, employees, independent contractors, franchisors, franchisees, and performers, while preserving limited exceptions for trade secrets, confidentiality, and certain business-sale agreements.
The overall sentiment is pro-worker and pro-competition, with the bill’s findings and substitute text framing noncompetes as harmful to wages, mobility, and economic growth. The committee vote was close, 5-4, suggesting meaningful opposition, but the measure advanced out of Senate Labor & Commerce. The discussion embedded in the bill text is strongly supportive of a broad ban and aligns with a policy trend toward limiting restrictive covenants.
The main contention is whether Washington should impose a near-total ban on noncompetes or preserve broader employer flexibility to protect business interests. Supporters argue that noncompetes are often imposed unilaterally, suppress wages, and restrict entrepreneurship, while critics are likely to focus on the impact on legitimate protections for trade secrets, goodwill, and customer relationships, as well as the bill’s penalties and retroactive application to some proceedings. There is also likely disagreement over the earnings threshold, the 18-month presumption, and whether the bill goes too far in covering independent contractors and other nontraditional workers.