Oregon employers who use non-competition agreements should prepare themselves for significant changes to Oregon’s non-competition law, which are set to take effect on January 1, 2008 and apply only to non-competition agreements entered into after that date. The new statutory provisions, which were signed into law by Oregon’s Governor Ted Kulongoski in early August, limit which employees an employer can lawfully enforce non-competition against, the conditions under which a non-competition agreement must be signed and the terms of non-competition agreements.
Previously, non-competition agreements, unless entered into upon bona fide advancement, were void unless entered into upon initial employment. Now, the initial employment requirement is gone. Instead, the employer must inform the employee in writing two weeks in advance of his or her start date that a non-competition agreement is required as a condition of employment. In addition, while the changes to the non-competition statute do not modify the allowance of non-competition agreements entered into upon subsequent bona fide advancement, three additional requirements are now imposed.
First, non-competition agreements are only valid as to administrative, executive or professional employees, as defined in Oregon’s minimum wage exemption statute. Second, the employer must have a protectable interest (for example, the employee has access to trade secrets). This is a codification of Oregon case law.
And, finally, the employee’s total annual salary and commissions at the time of termination must exceed the median family income for a four-person family (currently, approximately $62,000). In addition, non-competition agreements will be limited to a two year restrictive period.
Nonetheless, while the new law limits the circumstances under which an employer can enforce non-competition agreements, it specifically carves-out an exception from these new requirements for agreements not to solicit an employer’s employees or agreements not to solicit or transact business with customers of the employer. This carve-out provides employers with a terrific opportunity to enter into non-solicitation agreements with employees so as to protect the employer’s most valuable assets (customers and employees) from solicitation by former employees while not requiring the employer to jump through the new hurdles for creating an enforceable non-competition agreement.
Finally, the Legislature adopted a procedure that allows employers to pay employees in order to enforce otherwise unenforceable agreements.
Nonetheless, while the new law limits the circumstances under which an employer can enforce non-competition agreements, it specifically carves-out an exception from these new requirements for agreements not to solicit an employer’s employees or agreements not to solicit or transact business with customers of the employer. This carve-out provides employers with a terrific opportunity to enter into non-solicitation agreements with employees so as to protect the employer’s most valuable assets (customers and employees) from solicitation by former employees while not requiring the employer to jump through the new hurdles for creating an enforceable non-competition agreement.
Finally, the Legislature adopted a procedure that allows employers to pay employees in order to enforce otherwise unenforceable agreements.
Because of the significant changes to Oregon’s non-competition statute, employers who intend to require new or existing employees to sign non-competition agreements should consult with legal counsel.
This article is intended for information purposes only and is not intended to convey legal advice.
Amy S. Campbell is an attorney at Ball Janik LLP. Campbell’s practice focuses on employment litigation and counseling and general litigation. She can be reached at 503/228-2525 or acampbell@bjllp.com.
Oregon Narrows Circumstances When Non-Competition Agreements Are Enforceable
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