Oregon Modifies its Noncompetition Law

Oregon amended its noncompetition statute making it harder for employers to perfect or enforce noncompetition agreements.

On May 21, 2021, Oregon amended its noncompetition statute, Oregon Revised Statute (ORS) 653.295 making it harder for employers to perfect and enforce noncompetition agreements. Senate Bill (SB) 169 changed the language in ORS 653.295 making noncompetition agreement "void" as opposed to "voidable" where the employer does not otherwise comply with the statute's requirements. This change is in direct opposition with prior case law interpreting that the "voidable" language in the statute meant that the noncompetition was enforceable, unless the employee took affirmative steps to void the agreement prior to the employer seeking to enforce it. SB 169 shortened the enforcement period from 18 months to a period of no more than 12 months.

Under the previous version of ORS 653.295, for a noncompetition agreement to be enforceable, the employee had to first be exempt as either an executive, professional, or administrative (White Collar) employee and receive a compensation above the median family income for a family or four, as determined by the U.S. Census Bureau. Under the amendments, an employee must still be an exempt White Collar employee. However, the minimum salary threshold was increased to $100,533, calculated on an annual basis at the time of the employee's termination. The amendments further provide that an employer may enforce a noncompetition agreement against an employee that does not meet the White Collar or salary requirements where the employer provides a written agreement and pays the employee the greater of 50% of the employees annualized gross salary or 50% of the statutory $100,533 amount during the period of the noncompetition, as adjusted annually for inflation.

SB 169 does not change the requirements for employers to provide written notice of the noncompetition agreement at least 14 days prior the employee's first day of work and to provide a signed written copy of the agreement within 30 days after termination of employment. Finally, the current version of ORS 653.295 or the amendments set out by SB 169 do not apply to other restrictive covenants, such as nondisclosure and nonsolicitation agreements. The amendments become effective on January 1, 2022.

This is a good time to start looking ahead and work with legal counsel to update your noncompetition agreements and policies to ensure compliance with the changes made by SB 169.