New Requirement for Noncompetition Agreements in Oregon
By Lindsay Reynolds
The Oregon legislature has added a new requirement for employers to enforce noncompetition agreements against their employees. On May 14, 2019, the Oregon legislature enacted HB 2992, requiring employers to provide a copy of the signed noncompete agreement to employees within 30 days after the date of the termination of the employee’s employment. This amendment will apply to all noncompetition agreements entered into after January 1, 2020.
The remainder of the Oregon noncompetition statute is unchanged. As a general overview, ORS 653.295 requires the following in order for a noncompetition agreement to be enforceable: (1) at least two weeks before the first day of the employee’s employment, the employer must inform the employee in a written employment offer that a noncompetition agreement is required as a condition of employment (or for current employees, the noncompetition agreement must be entered into upon a subsequent bona fide advancement of the employee); (2) the employee must qualify for one of the “white collar” exemptions under the Oregon statute; (3) the employee must have access to trade secrets or competitively sensitive confidential business information; and (4) at the time of the employee’s termination, the total amount of the employee’s annual gross salary and commissions must exceed the median family income for a four-person family. Now, add to the list that a copy of the signed noncompetition agreement must be provided to the employee within 30 days after the date of the employee’s termination. In addition, the term of a noncompetition agreement may not exceed 18 months from the termination date. Failure to meet these requirements – including the written notice to a departing employee, could prevent an employer from successfully enforcing the noncompete agreement in court. Note, the statute does not apply to bonus restriction or nonsolicitation agreements.
There is a growing trend among many states to enact legislation making it more difficult for employers to enforce noncompetition agreements entered into with their employees. This year, Washington enacted a strict noncompetition statute with similar provisions to Oregon. A discussion of the new requirements for Washington noncompetition agreements can be found here.
Next Steps for Employers: In light of the recent amendment to the Oregon noncompetition statute, employers should consider the following:
Even though this amendment does not affect noncompetition agreements entered into before January 1, 2020, employers should immediately implement the practice of sending written notice to departing employees of their continuing obligations under applicable agreements with the employer, and include a copy of the noncompetition agreement with the letter. This would be a good idea even without the new change in the law, because it signals the employer's intent to enforce the noncompete.
Employers should review existing noncompetition agreements and consult with counsel before enforcing the noncompetition agreement.
Before providing an offer to employees, employers should consider whether it is worth the burden and expense of enforcing noncompetition agreements against its employees, or whether entering into a nonsolicitation agreement – which is not subject to the Oregon statute – would suffice as an alternative.
This update is prepared for the general information of our clients and friends. It should not be regarded as legal advice. If you have further questions on this topic, please email a member of our Labor & Employment Practice Group, or the attorney with whom you normally consult.