For years, employers evaluating restrictive covenants often focused on one principal question: Will a court enforce this agreement if an employee leaves for a competitor?
Increasingly, that is not the only question that matters.
A recently filed putative class action against Ashley Furniture in Washington illustrates the expanding risks associated with restrictive-covenant compliance. At the same time, Washington has continued to overhaul its non-compete statute, most recently enacting legislation that will generally prohibit noncompetition covenants beginning June 30, 2027.
For multi-state employers, these developments reinforce a basic but increasingly important point: there is no one-size-fits-all approach to restrictive covenants. State laws differ not only as to what restrictions are enforceable, but also as to notice, consideration, earnings thresholds, available remedies, and even what constitutes a “noncompetition covenant.”
A Different Kind of Non-Compete Case
The Ashley Furniture case presents an interesting twist. The plaintiff does not principally challenge a traditional covenant prohibiting competition after employment ends. Instead, the putative class action challenges provisions in Ashley Furniture’s Culture Guide regulating conflicts of interest and outside employment during employment.
According to the complaint, the Culture Guide identified as potential conflicts certain work for suppliers, customers, competitors, and other entities doing business with Ashley Furniture, as well as certain simultaneous employment with a competitor or supplier. The plaintiff alleges that these restrictions constitute “noncompetition covenants” under Washington law and were not timely disclosed per Washington’s notice provisions or supported by independent consideration.
That theory has not been adjudicated, and the distinction between during-employment and post-employment restrictions may prove significant.
But Washington’s current statutory definition is broad. It defines a “noncompetition covenant” to include an agreement through which an employee or independent contractor is prohibited or restrained from engaging in a lawful profession, trade, or business of any kind. Unlike the statute’s definition of a “nonsolicitation agreement,” that definition contains no express requirement that the restraint apply only after employment ends.
Washington also separately regulates restrictions on certain employees holding an additional job, while expressly preserving obligations arising from the common-law duty of loyalty, conflict-of-interest law, and corresponding employer policies.
We expect that Ashley Furniture will challenge the predicate that a during-employment restraint is a noncompete as contemplated under the Washington statute.
Washington’s Rapidly Changing Non-Compete Law
Washington also demonstrates how quickly the rules can change.
The state’s comprehensive non-compete statute became effective in 2020 and imposed compensation thresholds, disclosure requirements, independent-consideration requirements for certain covenants entered after employment begins, and other limitations.
Washington amended the statute again in 2024, including by expressly providing that a “noncompetition covenant” includes an agreement that directly or indirectly prohibits the acceptance or transaction of business with a customer.
Then, in 2026, Washington went substantially further. HB 1155, signed into law on March 23, 2026, provides that beginning June 30, 2027, statutory noncompetition covenants will be void and unenforceable regardless of when they were entered into. The law also prohibits employers from entering into, attempting to enter into, enforcing, attempting or threatening to enforce, or representing that a worker is subject to such a covenant. Employers also will have an obligation to make reasonable efforts by October 1, 2027, to notify certain current and former workers that their noncompetition covenants are void and unenforceable.
In short, an agreement that complied with Washington law several years ago may not satisfy today’s requirements, and employers will need to revisit existing agreements again before the 2027 changes take effect.
The Risk Is Increasingly More Than Non-Enforcement
The Washington lawsuit illustrates another significant development. The downside of a noncompliant restrictive covenant may no longer be limited to a court refusing to enforce it.
Washington law provides an aggrieved person with the greater of actual damages or a statutory penalty of $5,000, together with reasonable attorneys’ fees, expenses, and costs. The Ashley Furniture plaintiff seeks statutory relief on a class-wide basis, as well as additional relief under Washington’s Consumer Protection Act. No class has been certified, and liability and the availability of the requested remedies remain to be determined.
Illinois recently provided a different illustration of the same risk.
As we previously reported, on October 9, 2026, the Illinois Attorney General announced a $1.9 million settlement with Equinox Holdings, Inc., consisting of $990,000 in restitution and a $910,000 civil penalty, resolving allegations that the company violated the Illinois Freedom to Work Act. The Attorney General alleged, among other things, that Equinox Holdings, Inc. used prohibited restrictive covenants with more than 300 lower-earning employees and failed to satisfy statutory notice and review requirements.
The Equinox matter involved government enforcement; the Ashley Furniture case involves a private plaintiff pursuing putative class relief. Together, they underscore the same point: restrictive-covenant compliance is increasingly an affirmative liability issue, not simply an enforceability issue.
Takeaways
For multi-state employers, restrictive-covenant compliance increasingly requires a state-by-state approach and periodic review. Employers should consider not only whether the substantive restraint is permissible, but also:
- Who receives it, including applicable earnings thresholds and occupational exclusions;
- What it restricts, including competition, solicitation, customer acceptance, outside employment, and other activities;
- When and how it is presented, including applicable notice, review-period, and consideration requirements;
- Where restrictions appear, including handbooks and employment policies beyond traditional restrictive-covenant agreements; and
- What has changed, particularly in jurisdictions such as Washington that have repeatedly amended their statutes.
The legal landscape is changing rapidly, and the potential consequences of noncompliance are increasing with it. A covenant that is appropriate in one state may be unenforceable, or potentially create affirmative exposure, in another. And an agreement that was compliant when drafted may no longer remain so as state legislatures continue to change the rules.
For multi-state employers, restrictive-covenant compliance therefore should not be viewed as a one-time drafting exercise. It increasingly requires an ongoing, jurisdiction-specific review of both agreements and employment policies.