Noncompetition, or noncompete, agreements are contracts that restrict employees from competing with their current employer for a specified period of time and within a specific geographic area after leaving their job. They can provide valuable protection for an employer’s confidential business information and trade secrets. They ensure your employees cannot steal information from your company if and when they leave employment.
Over the last few years, however, Oregon has imposed additional requirements making it more difficult for employers to enforce noncompetition agreements. Careful compliance with ORS 653.295, Oregon’s noncompetition agreement statute, ensures your business will be able to enforce a noncompete if necessary.
Oregon’s noncompete agreement law updates
Prior to the 2021 amendments, the Oregon noncompete statute stated, “A noncompete agreement is voidable and may not be enforced by a court of this state unless…”
The statute continued to list the requirements the agreement had to meet in order to be enforceable. In 2021, the language was changed from “voidable and may not be enforced by a court of this state” to “void and unenforceable.” If a noncompetition agreement does not satisfy all the requirements of ORS 653.295, it will be void as a matter of law.
The legislature also changed the minimum salary requirements an employee must meet in order for an employer to enforce a noncompetition agreement against them. ORS 653.295 imposes a minimum salary an employee must make in order for an employer to enforce a noncompete against them. Before the 2021 amendments, noncompete agreements were enforceable when: “With limited exception, the employee makes more than the median family income for a family of four as determined by the U.S. Census Bureau.”
In 2021, the legislature changed ORS 653.295 to read: “With limited exception, an employee must earn at least $100,533 (which will be adjusted annually for inflation) instead of using the Census Bureau’s data as an income basis.”
The legislature also limited the duration an employer can enforce a noncompete against an employee from 18 months to 12 months.
Is a noncompete agreement right for my business?
Here are a few key reasons you might consider using a noncompete agreement in Oregon:
- Protect Business Interests: Noncompete agreements can help protect your company’s legitimate business interests, such as confidential information, trade secrets, customer relationships, and goodwill from being unfairly exploited by former employees.
. - Safeguard Proprietary Resources: If your business invests a significant amount of time and resources in training employees, a noncompete agreement can help ensure that they don’t immediately leave and take that investment to a competitor.
. - Retain Key Talent: Knowing that a noncompete agreement is in place can incentivize key employees to stay with your company since it limits their ability to work for competitors in the same field.
. - Preserve Customer Relationships: In industries where relationships with customers are critical, noncompete agreements can help prevent former employees from soliciting your clients immediately after leaving.
We Can Help.
Before implementing a noncompete agreement, it’s advisable to consult with legal counsel to ensure that the agreement complies with Oregon law and is customized to your specific business needs. Additionally, you should consider alternative methods of protecting your business interests, such as confidentiality agreements and non-solicitation agreements, which may be more appropriate in some situations. We can help. Chenoweth Law Group represents employers throughout Oregon and Washington with a myriad of employment law matters. Call us at 503-446-6261 or contact us online, anytime!
