On March 23, Gov. Bob Ferguson signed a law that will, on June 30, 2027, render thousands of existing noncompete provisions void and unenforceable across Washington state. No court decision. No individual review. No compensation. Just gone.
The law is House Bill 1155, and it bans noncompete agreements — contracts that restrict employees from working for competitors after leaving a company. The policy debate over noncompetes is real and legitimate. But in its rush to win that debate, Olympia made a choice that has received almost no public attention: It made the ban retroactive.
That means agreements signed years ago — agreements the parties signed under the law then in force, which may have shaped hiring decisions, salary negotiations, training investments and career choices on both sides — will be erased on a single date. Employers who built compensation packages around noncompete protections will lose an important contractual tool and will have to rely more heavily on confidentiality, trade secret and nonsolicitation arrangements instead.
Critics of noncompete agreements may declare victory, assuming that the ban will free workers, boost wages and spark a new wave of entrepreneurship across the state. But even if these assertions are true — and there are good reasons to believe they may not be — all of this is beside the point.
The question is not only whether the policy goal is worthy. It is whether achieving that goal by retroactively erasing contracts that people signed in good faith is an acceptable way to govern.
It is certainly not. This is not how responsible legislatures treat contracts.
The retroactivity problem gets worse when you look at how broadly the law defines what counts as a prohibited noncompete. It is not just the obvious cases — agreements barring a software engineer from joining a rival firm. The law’s language is wide enough, according to legal analysts, to potentially reach equity forfeiture clauses and bonus clawback provisions: the kinds of compensation structures that tech companies, health care systems and financial firms use to retain key talent.
State lawmakers justified all this by citing the Federal Trade Commission’s 2024 rule banning noncompetes nationwide. There is a problem with that argument: A federal district court struck that rule down as beyond the FTC’s legal authority, and the FTC subsequently dropped its appeal entirely, leaving the court’s ruling to stand. The bill’s own findings invoke a regulation that a federal court declared unlawful and that the federal government itself walked away from.
That is a shaky intellectual foundation for legislation that will unwind thousands of existing contracts.
None of this means noncompete agreements are beyond criticism. They can sometimes suppress wages, trap workers in jobs and in their worst forms function as weapons that employers use to scare employees out of ever leaving. Washington’s prior law, which already restricted noncompetes to workers earning above certain income thresholds, was a reasonable attempt to balance these concerns. The case for further reform is not entirely unreasonable.
But there is a significant difference between banning new noncompete agreements going forward and retroactively voiding ones that already exist. The first is a policy choice about the future. The second is the government telling parties to contracts they signed in good faith that those contracts no longer count without any individualized finding that a specific agreement was abusive or unfair.
Even people who dislike noncompetes should be uncomfortable with that precedent.
Washington is home to Microsoft, Amazon and some of the most R&D-intensive technology firms in the world. These are companies that make enormous investments in training employees, developing proprietary knowledge and building teams. Noncompete agreements, used appropriately, are one of the tools that make those investments viable.
Our state’s Legislature did not seriously grapple with that trade off. Instead it cited a dead federal rule, declared the matter settled and wrote into the statute itself an invitation for the rest of the nation to follow: “Let the actions of this legislature to improve prosperity for all pave the way for the nation.”
That confidence might be more reassuring if state lawmakers had not just retroactively voided contractual provisions that many Washingtonians signed years ago — without realizing the law would reach agreements they had already made.
Victor Menaldo: is a political science professor at the University of Washington, co-founder of the UW Political Economy Forum and co-author of “Authoritarianism and the Elite Origins of Democracy.”