Over the last several years, the Oregon Legislature has whittled away employers’ ability to enforce employee non-competition agreements (see our posts from 2007, 2015). Senate Bill 169, which Governor Brown signed into law on May 21, 2021, further limits an employer’s ability to impose non-competition obligations on employees. Effective starting January 1, 2022, the statute will require:
- A maximum 12-month duration for agreements entered on or after January 1, 2022. Current Oregon law provides that non-competition agreements could be enforced for up to 18 months post-termination. Existing employee non-competes are not affected by the shortened restriction period.
- The employee must receive an annual gross salary at time of termination of at least $100,533, adjusted annually for inflation.
Existing requirements for non-competes will remain in effect, including:
- The employer must inform the employee in a written employment offer received by the employee at least two weeks before the first day of employment that a non-competition agreement is required as a condition of employment, or the non-competition agreement must be entered into upon a “bona fide advancement” of the employee.
- Within 30 days of the employee’s termination, the employer must provide the employee a signed, written copy of the employee’s non-competition agreement. (This requirement became effective January 1, 2020, so if it’s not already a part of your company’s termination checklist, be sure to add it now.)
- The employee must qualify as “exempt,” and the employer must have a “protectable interest” as defined by the statute (for example, the employee has access to the company’s trade secrets, or other competitively sensitive or confidential business information).
Unless these requirements are met, the non-competition agreement is “void and unenforceable.” The current statute provides that a non-compliant agreement is “voidable,” not “void.”
Note that these requirements apply only to non-competition agreements connected to employment; they do not apply to covenants not to solicit employees or customers, nor do they apply to non-competition agreements outside of the employment setting. For example, agreements that prevent employees from “soliciting or transacting business” with the employer’s customers or agreements with the seller of a business fall outside the scope of the statute.
If you have any questions, feel free to contact any of our labor and employment attorneys.