Oregon law requires several conditions in order to have a valid agreement restricting the kinds of work an employee may perform and where it may occur after separating from their employer.
The Law
ORS 653.295
Noncompetition Agreements
By way of definition, a noncompetition agreement is a written agreement between the employer and employee in which the employee agrees not to compete with the employer in providing products, processes or services that are similar to those of the employer for a specified period of time within a specific geographic region.
Prior to 2022, a noncompetition agreement was ‘voidable’ under several conditions. Under
SB 169 (2021) the Legislature narrowed the application of noncompetition agreements and clarified that agreements entered into on or after January 1, 2022 which did not meet revised criteria are simply void. This means an employee would not have to take any affirmative steps to invalidate an agreement that didn’t meet the requirements.
Under a valid noncompetition agreement, the employee must either: (1) receive written notice that the agreement is a condition of employment at least two weeks before employment starts or (2) enter into the agreement upon a bona fide advancement of the employee by the employer. In addition, a noncompetition agreement is also void unless:
- The employee meets the criteria for a
salaried exempt employee whose annual income at termination exceeds a minimum amount adjusted each year for inflation. (See below for details).
- The employer has an interest to protect, such as trade secrets; sensitive, confidential business or professional information; product development plans; launch plans; marketing strategy or sales plans; and finally,
- The employer must also provide a signed, written copy of the terms of the noncompetition agreement to the employee within 30 days after the employee’s termination.
Under
SB 169 (2021), the effective term of the agreement was shortened from 18 months to 12 months following the end of employment.
ORS 653.295.
For the provisions of a noncompetition agreement to be valid, the statute generally requires that the total amount of the employee’s annual gross salary and commissions at the time of the employee’s termination must exceed a minimum amount. For 2022, the year
SB 169 (2021) took effect, that number was $100,533. The statute also requires that this minimum annual amount be adjusted each year based on the Consumer Price Index for All Urban Consumers, West Region (All Items), as published by the Bureau of Labor Statistics of the United States Department of Labor. BOLI will use the average annual inflation for Western Region provided by BLS to compute the minimum salary and commission going forward.
Table of minimum salary and commission requirements by year
| Year | Minimum Amount to Exceed[1]
| Average Annual Inflation[2]
|
|---|
| 2022 | $100,533 | 8.0%
|
| 2023 | $108,581
| 4.3%
|
2024
|
$113,241
| TBD
|
[1] Rounded to the nearest dollar.
[2] Percentage represents
average annual inflation for the Western Region for the corresponding year less the index for the year prior, divided by the year prior, multiplied by 100. For example, the index for 2022 was 310.509. For 2021, the index was 287.494. The difference is 23.015. That difference divided by the index for 2021 then multiplied by 100 is 8.0053845%. Inflation displayed here to 1/10th of a percent.
Exceptions: In general, employers may only enforce a noncompetition agreement with an employee who is not exempt or does not meet the minimum annual salary and commission requirements when the employer agrees in writing to pay either 50% of the employee’s annual base salary plus commissions at termination or 50% of minimum salary listed above, whichever is greater, for the term of the agreement.
Additional provisions may apply to individuals employed as on-air talent. Contact
Employer Assistance for details.
NOTE: The Federal Trade Commission issued a proposed rulemaking (January 5, 2023) that would generally prohibit the use of noncompete agreements. On April 23, 2024, the Federal Trade Commission (FTC) issued a final rule banning noncompetes nationwide.
Under the FTC’s new rule, existing noncompetes for the vast majority of workers will no longer be enforceable after the rule’s effective date. Existing noncompetes for “senior executives” can remain in force, but employers may not enter into or enforce any new noncompetes, even if they involve senior executives. Employers will be required to provide notice to workers (other than senior executives) that they will not be enforcing any noncompetes.
The final rule will go into effect (barring legal challenges) 120 days after publication in the Federal Register.
Employers should verify the current status of this rule or seek legal counsel prior to implementing any noncompetition agreements.