Non-Compete Agreements Not Longer Than 18 Months in Oregon
Attorney: Ryan Probstfeld
The Oregon legislature recently passed House Bill 3236 and amended ORS 653.295 which governs non-competition agreements in Oregon. Effective January 1, 2016, new non-competition agreements entered into on or after that date may not contain a term longer than eighteen (18) months from the date of the employee’s termination. Prior to this case, non-competition agreements were enforceable up to two years from the date of an employee’s termination. If a non-compete agreement contains a term longer than 18-months, the remaining portion of the term in excess of 18 months is voidable and may not be enforced by an Oregon court.
The other rules governing non-competition agreements remain the same. A non-competition may not be enforced and is voidable unless:
- The non-compete agreement protects a protectable interest (i.e. trade secrets, competitively sensitive business material, etc.);
- The employee is engaged in administrative, managerial or professional work, performs predominantly intellectual, managerial or creative tasks, exercises discretion and independent judgment, and is paid on a salary basis (i.e. no non-compete agreements for hourly farm workers);
- The employer informs the employee in a written employment offer, at least two week before the employee’s first day of work, or upon a subsequent bona fide advancement, that a non-competition agreement is required as a condition of employment; and
- The employee’s gross salary and commissions at the time of termination must exceed the median family income for a four-person family, as determined by the United States Census Bureau (USCB) for the most recent year available at the time of termination (e.g. $76,240 in 2014).
Even if the employee is not an administrator, manager or professional , or doesn’t meet the salary requirement above, a non-competition agreement is still enforceable if the employer provides the employee at the time of termination the greater of compensation equal to at least 50% of the employee’s annual gross base salary and commissions, or 50% of the USCB median family income for four-person family.