Is an employee non-compete enforceable in Oregon?
A noncompetition agreement between an employer and employee is void and unenforceable unless all of ORS 653.295(1) is met: (a) the employer informed the employee in a written employment offer received at least two weeks before the first day of employment that a noncompetition agreement is required as a condition of employment, or the agreement is entered into upon a subsequent bona fide advancement; (b) the employee is a person described in ORS 653.020(3), an individual engaged in administrative, executive or professional work who performs predominantly intellectual, managerial or creative tasks, exercises discretion and independent judgment, and earns a salary and is paid on a salary basis; (c) the employer has a protectable interest, which exists when the employee has access to trade secrets as defined in ORS 646.461 or to competitively sensitive confidential business or professional information that would not otherwise qualify as a trade secret, such as product development plans, product launch plans, marketing strategy or sales plans, or is on-air broadcasting talent meeting (2)(c); (d) within 30 days after termination the employer provides a signed, written copy of the terms; and (e) the employee's annual gross salary and commissions at the time of termination exceed $100,533, adjusted annually for inflation under the Consumer Price Index for All Urban Consumers, West Region, as (e) specifies (not applicable to (2)(c) employees). The term may not exceed 12 months from termination, and the remainder of a longer term is void and may not be enforced (653.295(3)). Notwithstanding (1)(b) and (e), an agreement is enforceable for its full term up to 12 months if the employer agrees in writing to pay the employee, for the time the employee is restricted, the greater of 50 percent of the employee's annual gross base salary and commissions at termination or 50 percent of the adjusted $100,533 (653.295(7)). Subsections (1) and (3) apply only to noncompetition agreements made in the context of an employment relationship or contract, and do not apply to bonus restriction agreements or to a covenant not to solicit employees of the employer or solicit or transact business with the employer's customers (653.295(4)-(5)). Both of those terms are defined. A noncompetition agreement is a written agreement under which the employee agrees not to compete with the employer, alone or as another's employee, in providing similar products, processes or services for a period of time or within a specified geographic area after termination (653.295(8)(d)). A bonus restriction agreement is narrower than its name suggests: the restraint must be limited to a reasonable period, area and set of activities, the employee's services must have involved substantial involvement in management, personal customer contact, knowledge of customer requirements or knowledge of trade secrets or other proprietary information, and the only penalty may be forfeiture of profit sharing or other bonus compensation not yet paid (653.295(8)(a)). Nothing in the section restricts the right to protect trade secrets or other proprietary information by injunction or any other lawful means under other applicable laws (653.295(6)).
The trap
Signing on the first day without the two-weeks-before written offer notice, and without a bona fide advancement, fails 653.295(1)(a). The salary figure is calculated at termination, not signing (1)(e). A term longer than 12 months is void beyond 12 months (3). The (7) payment alternative excuses only conditions (1)(b) and (1)(e), not (a), (c) or (d). Calling a clause a bonus restriction agreement does not take it outside subsections (1) and (3) unless it meets all three limbs of the 653.295(8)(a) definition, including that the only penalty is forfeiture of unpaid profit sharing or bonus compensation. And a void non-compete does not leave the employer without recourse, because 653.295(6) preserves trade-secret and proprietary-information remedies under other law.
8 authorities
- statuteORS 653.295enactment date not established
The words that state the rule
A noncompetition agreement entered into between an employer and employee is void and unenforceable unless: (a)(A) The employer informs the employee in a written employment offer received by the employee at least two weeks before the first day of the employee’s employment that a noncompetition agreement is required as a condition of employment; or (B) The noncompetition agreement is entered into upon a subsequent bona fide advancement of the employee by the employer; (b) The employee is a person described in ORS 653.020 (3); (c) The employer has a protectable interest as described in subsection (2) of this section; (d) Within 30 days after the date of the termination of the employee’s employment, the employer provides a signed, written copy of the terms of the noncompetition agreement to the employee; and (e) The total amount of the employee’s annual gross salary and commissions, calculated on an annual basis, at the time of the employee’s termination exceeds $100,533, adjusted annually for inflation pursuant to 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 immediately preceding the calendar year of the employee’s termination. This paragraph does not apply to an employee described in subsection (2)(c) of this section.
- statuteORS 653.295enactment date not established
The words that state the rule
For purposes of subsection (1)(c) of this section, an employer has a protectable interest when the employee: (a) Has access to trade secrets, as defined in ORS 646.461; (b) Has access to competitively sensitive confidential business or professional information that otherwise would not qualify as a trade secret, including product development plans, product launch plans, marketing strategy or sales plans; or (c) Is employed as an on-air talent by an employer in the business of broadcasting and the employer: (A) In the year preceding the termination of the employee’s employment, expended resources equal to or exceeding 10 percent of the employee’s annual salary to develop, improve, train or publicly promote the employee, provided that the resources expended by the employer were expended on media that the employer does not own or control; and (B) Provides the employee, for the time the employee is restricted from working, the greater of compensation equal to at least: (i) Fifty percent of the employee’s annual gross base salary and commissions at the time of the employee’s termination; or (ii) Fifty percent of $100,533, adjusted annually for inflation pursuant to 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 immediately preceding the calendar year of the employee’s termination.
- statuteORS 653.295enactment date not established
The words that state the rule
The term of a noncompetition agreement may not exceed 12 months from the date of the employee’s termination. The remainder of a term of a noncompetition agreement in excess of 12 months is void and may not be enforced by a court of this state. (4) Subsections (1) and (3) of this section apply only to noncompetition agreements made in the context of an employment relationship or contract and not otherwise. (5) Subsections (1) and (3) of this section do not apply to: (a) Bonus restriction agreements, which are lawful agreements that may be enforced by the courts in this state; or (b) A covenant not to solicit employees of the employer or solicit or transact business with customers of the employer.
- statuteORS 653.295enactment date not established
The words that state the rule
Nothing in this section restricts the right of any person to protect trade secrets or other proprietary information by injunction or any other lawful means under other applicable laws.
- statuteORS 653.295enactment date not established
The words that state the rule
Notwithstanding subsection (1)(b) and (e) of this section, a noncompetition agreement is enforceable for the full term of the agreement, for up to 12 months, if the employer agrees in writing to provide the employee, for the time the employee is restricted from working, the greater of: (a) Compensation equal to at least 50 percent of the employee’s annual gross base salary and commissions at the time of the employee’s termination; or (b) Fifty percent of $100,533, adjusted annually for inflation pursuant to 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 immediately preceding the calendar year of the employee’s termination.
- statuteORS 653.020enactment date not established
The words that state the rule
(3) An individual engaged in administrative, executive or professional work who: (a) Performs predominantly intellectual, managerial or creative tasks; (b) Exercises discretion and independent judgment; and (c) Earns a salary and is paid on a salary basis.
- statuteORS 653.295enactment date not established
The words that state the rule
“Bonus restriction agreement” means an agreement, written or oral, express or implied, between an employer and employee under which: (A) Competition by the employee with the employer is limited or restrained after termination of employment, but the restraint is limited to a period of time, a geographic area and specified activities, all of which are reasonable in relation to the services described in subparagraph (B) of this paragraph; (B) The services performed by the employee pursuant to the agreement include substantial involvement in management of the employer’s business, personal contact with customers, knowledge of customer requirements related to the employer’s business or knowledge of trade secrets or other proprietary information of the employer; and (C) The penalty imposed on the employee for competition against the employer is limited to forfeiture of profit sharing or other bonus compensation that has not yet been paid to the employee.
- statuteORS 653.295enactment date not established
The words that state the rule
“Noncompetition agreement” means a written agreement between an employer and employee under which the employee agrees that the employee, either alone or as an employee of another person, will not compete with the employer in providing products, processes or services that are similar to the employer’s products, processes or services for a period of time or within a specified geographic area after termination of employment.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.