As our readers know, in 2024 the Federal Trade Commission’s (FTC) proposed regulation to eliminate almost all noncompete agreements did not come to fruition — at least for now. As we reported earlier this month, however, the failure of the FTC ban has not stopped states from sharpening their hostility toward employer non-compete agreements.
One method many states use to restrict noncompete agreements is income thresholds, which prohibit employers from entering into noncompete agreements or other restrictive covenants with employees who earn below a certain wage. We previously wrote about these restrictions here. In several states, the threshold increases annually. Specifically, thresholds in Washington, Colorado, Maine, Rhode Island, Oregon, Virginia, and Washington D.C. increase each year. So, as we ring in 2025, we also ring in higher income thresholds in those states.
Washington: Washington’s noncompete statute, RCW 49.62.020, originally established an income threshold of $100,000. The Washington State Department of Labor & Industries adjusts the threshold annually to account for inflation. According to its website, the 2025 threshold for employees is $123,394.17. Washington maintains a higher income threshold for independent contractors, which increases to $308,485.43 in 2025.
Colorado: Colorado’s new noncompete law established a noncompete income threshold and a non-solicitation income threshold. The noncompete threshold is based on the Colorado Department of Labor’s definition of a “highly compensated” worker, which is updated annually. The non-solicitation threshold is 60% of the noncompete threshold. In 2024, the noncompete threshold was $123,750, and the non-solicitation threshold was $74,250. In 2025, the thresholds will be $127,091 and $76,254.60, respectively.
Maine: Maine bases its threshold on the federal poverty level. Maine’s threshold is 400% of the federal poverty level. Accordingly, Maine is updating its $60,240 threshold from 2024 to $62,600 in 2025.
Rhode Island: Rhode Island’s threshold is also based on the federal poverty level. Rhode Island’s threshold is 250% of the federal poverty level. Thus, Rhode Island’s threshold of $37,650 in 2024 is being increased to $39,125 in 2025.
Oregon: Oregon’s threshold is based on the consumer price index for all urban consumers in the western region, which increases its threshold from $113,241 in 2024 to $116,427 in 2025.
Virginia: Virginia’s threshold is based on the average weekly wage in the Commonwealth, which increases the Commonwealth’s 2024 threshold of $73,320 to $76,081.20 in 2025.
Washington D.C.: D.C.’s threshold is adjusted annually based on the Consumer Price Index. Although not yet released, D.C.’s $154,200 threshold is expected to increase considerably in 2025.
None of the other states that currently impose income thresholds are set to increase their thresholds in 2025. Under Illinois’s recent noncompete law, the $75,000 income threshold is not set to increase until 2027. As for the remaining states, a date of increase is not predetermined, and there is no reason to expect increases in 2025. New Hampshire’s threshold is tied to the federal minimum wage, Maryland’s threshold is set at $15 per hour and will not change (absent new legislation), Massachusetts’ threshold is tied to whether an employee is exempt under the FLSA, and Nevada’s threshold is based on whether an employee is paid on an hourly basis.
In light of the new thresholds, employers expecting to enter noncompete agreements with employees in Washington, Colorado, Maine, Rhode Island, Oregon, Virginia, or Washington D.C. should work with counsel to modify their agreements to meet these new standards as well as conside adjusting compensation for key employees who are close to the new thresholds. We will continue to monitor and report on developments in this highly dynamic area of law.