For the fourth time in six years, Oregon is in the news again for an update to its non-compete laws.
Prior Oregon Law
Oregon last updated its non-compete laws just two years ago, with a statute that requires employers to provide terminated employees with a signed, written copy of their non-compete within 30 days of termination. That new obligation was in addition to other Oregon-specific requirements, including:
- Similar to Massachusetts’ 2018 law, the employer must inform the employee that a non-compete is a condition of employment in a written employment offer received at least two weeks before the employee’s first day, or the agreement must entered into upon a “bona fide” promotion;
- The employee must be engaged in administrative, executive, or professional work and must (a) perform predominantly intellectual, managerial or creative tasks, (b) exercise discretion and independent judgment, and (c) be salaried;
- The employee’s gross annual salary and commissions at the time of termination exceeds the median family income for a four-person family; and
- The duration of non-compete duration could not exceed 18 months.
If an employer failed to comply with any of the foregoing requirements, the agreement was “voidable” – meaning that if an employee did not seek to void the agreement before the employer sought to enforce it, it was not automatically unenforceable.
Now, the Oregon legislature has yet again narrowed the scope of permissible non-competes. The new law, which applies to non-competes entered into on or after May 21, 2021, makes a number of important changes to the previous non-compete landscape:
- The maximum duration of the non-compete has been decreased from 18 months to 12 months;
- The compensation threshold has been replaced with a requirement that non-competes will only be enforceable against employees whose gross annual salary and commissions at the time of termination exceeds $100,533 annually, adjusted every year for inflation; and
- Agreements that do not comply with the statutory provisions are now void, not just voidable. In other words, an employer cannot simply rest upon a non-conforming agreement and hope that the employee will not seek to void the agreement before enforcement.
Particularly in light of the change from “voidable” to “void,” it will be critical for employers with operations in Oregon to carefully consider the new requirements that are now effective. While this law does not require employers to apply Oregon law to its restrictive covenants with Oregon-based workers (unlike statutes in Washington and California), and thus a business could choose a more employer-friendly law to govern, employers should be aware that an employee could challenge the choice of a foreign law – and may be successful. We encourage our readers to consult with competent counsel to ensure their agreements have the best chance of being enforced.