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Noncompetition Agreements
Oregon allows noncompetition agreements with certain restrictions as long as both parties enter into the contract prior to employment or a bona fide advancement. However, employers should consult with counsel before entering into such agreements and decide whether their enforcement is truly worth the expense of litigation. Note that some states such as California have banned noncompetition agreements altogether because they limit a departing employee’s ability to earn a living. 
 
To be valid, noncompetition agreements must meet the following criteria pursuant to ORS 653.295:
  • The employee is exempt from minimum wage and overtime as a “white collar” employee (i.e., he or she fits into either the executive, administrative or professional exemption);  
  • At termination, the employee’s annual salary and commissions exceed the median family income for a family of four as determined by the U.S. Census Bureau;
  • The employer has what is called a “protectable” interest. This means that the employee will have access to trade secrets or competitively sensitive confidential business or professional information, such as product development, product launch, marketing or sales plans and strategies;
  • The agreement is entered into at the beginning of employment (or bona fide advancement), and the employer has provided a written notice to the employee - at least two weeks before employment begins - that a noncompetition agreement will be required; 
  • [NEW] Within 30 days of an employee’s termination, the employer must provide to the employee a signed, written copy of any noncompetition agreement entered into on or after January 1, 2020; and
  • The agreement is not effective for longer than 18 months from the date of the employee’s termination.  
Note: Special rules apply to on-air talents in the broadcast industry.

Q: For an employee to be relieved of a noncompetition agreement, are there specific steps that they must take?
 
A: Yes. In 2015, the Oregon Appeals court ruled in Bernard v. S.B., Inc. that an employee must take affirmative steps to invalidate or void the obligation of the noncompetition agreement that does not meet the requirements listed above.  
 
Q: A former employee with deep knowledge of our company’s marketing strategy has now joined our chief competitor. The employee worked for us two years ago and signed a valid non-compete prior to taking the exempt condition. How can I enforce the agreement? 
 
A: Under Oregon law, a non-compete agreement is only enforceable for 18 months after the employee’s departure. Even if the parties have signed onto a non-compete stating a longer duration, the contract is only valid during the shelf life specified by law.  
 
Q: Can an employer require all qualifying, eligible employees to sign a noncompetition agreement as a condition of employee or promotion?
 
A: An employer may require that all exempt employees sign a noncompetition agreement before accepting a position if the arrangement meets specific guidelines listed above, but doing so may limit an employer’s universe of available applicants while adding legal expenses for enforcement. The best practice for employers is to consider whether the business case for such contracts justifies the legal risks and costs.  
 
Q: What about preventing my former employees from soliciting existing customers or using trade secrets of my business?
 
A: Employers may still seek to enforce valid agreements prohibiting former employees from soliciting customers of the employer or from using protecting trade secrets by way of injunctions or other legal means. Although potentially expensive to enforce, valid noncompetition agreements can restrict the ability of former employees to use proprietary information gained in a previous position for a period of time. 
 
August 2019

DISCLAIMER 
Nothing on this website is intended as legal advice.  Any responses to specific questions are based on the facts as we understand them, and not intended to apply to any other situations.  This communication is not an agency order.  If you need legal advice, please consult an attorney.  We attempt to update the information on this website as soon as practicable following changes or developments in the laws and rules affecting Oregon employers, but we make no warranties or representations, express or implied, about whether the information provided is current.  We urge you to check the applicable statutes and administrative rules yourself and to consult with legal counsel prior to taking action that may invoke employee rights or employer responsibilities or omitting to act when required by law to act.
 
TECHNICAL ASSISTANCE FOR EMPLOYERS
800 NE OREGON STREET, STE 1045
PORTLAND, OR  97232
971-673-0824
 
 
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