States Race to Restrict Noncompete Clause
On March 23, Washington became the fifth state to enact a full ban on noncompete agreements, which can prevent employees from taking new jobs or starting businesses in their industry after leaving an employer. Washington joins California, Minnesota, North Dakota and Oklahoma in enacting a blanket noncompete ban. Thirty-six other states and the District of Columbia have more limited restrictions on noncompetes.
Washington’s Expanded Ban and Other Income Restrictions
Washington HB 1155/Chapter 149 was signed by Democratic Gov. Bob Ferguson on March 23. Effective June 30, 2027, the new law will expand on the state’s current restrictions, which prohibits noncompetes for employees earning less than $100,000. Once the new law goes into effect, noncompete agreements will be banned for all employees regardless of income.
Other states like Colorado, Illinois, Maine, Maryland, New Hampshire, Oregon, Rhode Island, Tennessee and Virginia have similar income restrictions. Tennessee is the latest state to enact income restrictions with HB 1035/Chapter 934. Signed by Republican Gov. Bill Lee on May 7, the new law prohibits noncompete agreements for employees earning less than $70,000 per year.
Other New Restrictions
In addition to Tennessee and Washington’s new prohibitions, several other states have enacted new noncompete legislation so far this year. Iowa, for instance, enacted HB 2254, which prohibits University of Iowa hospitals and clinics from including noncompete clauses in employment contracts for certain positions. Louisiana, on the other hand, enacted a ban on the use of noncompete agreements for interns and apprentice with HB 315/Act 150.
Federal Action
On April 23, 2024, the Federal Trade Commission (FTC) issued its final rule banning noncompetes nationwide. A few months later, however, a district court issued an order stopping the FTC from enforcing the rule. At the beginning of this year, the FTC removed the rule from federal regulations, shifting its strategy to a case-by-case enforcement approach.
On April 15, 2026, the commission ordered a large pest-control company to stop enforcement of its more than 18,000 noncompete agreements with employees. The agreements prohibited employees from working in the pest-control industry for two years after leaving the company and within a 75-mile radius from one of its more than 700 locations. The FTC also issued warning letters to 13 other companies in the pest control industry, urging them to review their employment agreements.
While the FTC has shifted its strategy addressing noncompete agreements under Republican President Donald Trump and Chairman Andrew Feguson, the commission still appears willing to act when agreements appear unfair or anticompetitive.
Proponents vs Opponents
An estimated 30 million workers in America are subject to a noncompete clause. Supporters of restrictions on these agreements argue that noncompetes suppress wages, job creation and prohibit entrepreneurs from starting new businesses. In 2024, the FTC estimated that its proposed federal noncompete ban would result in more than 8,500 additional businesses created each year.
Opponents of noncompete bans say that they are necessary for businesses to protect proprietary information and intellectual property, promote company investment in employees and encourage internal collaboration.
FOCUS will continue to monitor both state and federal regulation of noncompete agreements.
by Will Beacom 8/10/2026
