Oregon Employers Beware: New Technical Requirements for Non-Compete Enforcement
Oregon (July 29, 2019) – On May 14, 2019, Oregon Governor Kate Brown signed House Bill (HB) 2992, amending the existing non-compete statute to now require employers to provide employees with a signed, written copy of their non-competition agreements within 30 days after the termination of employment. The amendment comes on the heels of several others implemented incrementally over the course of the past few years to protect Oregon employees from over-zealous non-compete enforcement. In 2015, Oregon legislature shortened the maximum length of non-compete agreements from 24 months to 18 months, and in 2017, it banned non-compete agreements for home care workers. The new termination-related notification requirements will go into effect on January 1, 2020.
Notably, the amended statute applies only to “noncompetition agreements,” which are defined as agreements “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.” This means that it does not apply to confidentiality agreements, “bonus restriction agreements,” or to a “covenant not to solicit employees of the employer or solicit or transact business with customers of the employer.” However, Oregon courts interpret these terms strictly, and overreaching on, for example, a covenant not to solicit customers can result in it being treated as a noncompetition agreement.
Generally, businesses with Oregon employees must remember that non-compete agreements are enforceable in the state only against: (1) employees exempt from minimum wage and overtime under Oregon law (e.g., managerial, executive, salaried employees); (2) employees who have access to a “protectable interest” of the employer, such as access to trade secrets or competitively sensitive commercial information; and (3) employees whose annual salary and commissions, at the time of their separation, exceed the median income for a family of four, as determined by the U.S. Census Bureau.
In light of these new requirements, Oregon employers should review and update their non-compete agreements, as well as institute new on-boarding and existing processes that incorporate the statutory pre-employment and post-employment requirements for non-compete agreements. Oregon employers should also assess whether they can adequately protect their interests with non-solicitation terms that are not subject to the ever-growing restrictions on non-compete terms in the state.
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Elisaveta "Leiza" Dolghih, Partner
Sean Driscoll, Partner