Oregon law imposes serious restrictions on employee non-competition agreements. Unless certain severe conditions are satisfied, an employee’s agreement not to compete with their employer after their employment ends will not be enforceable. However, Oregon law specifically exempts employee non-solicitation agreements from the legal restrictions governing the validity of employee non-competition agreements. The distinction then between non-competition agreements and non-solicitation agreements is important.
A. Limitations on Noncompetition Agreements.
A non-competition agreement is generally only enforceable under Oregon law (ORS 653.295(1)) if:
1. The employee is given a written employment offer at least 2 weeks before starting work notifying the employee that their agreement not to compete will be a condition of employment; or,
2. The noncompetition agreement is entered into upon a bona fide advancement of the employee by the employer; and,
3. The employee will perform predominately intellectual, managerial or creative tasks;
4. The employer has a protectable interest such as where the employee has access to the employer’s trade secrets or to sensitive and confidential business information that wouldn’t qualify for trade secret protection or the employee is employed as an on-air broadcasting talent subject to certain specific conditions; and,
5. The total amount of the employee’s gross salary and commissions on termination exceeds the median family income for a four-person family as determined by the U.S. Census Bureau for the most recent year available.
Moreover, even a valid and enforceable employee noncompetition agreement can’t be for any term longer than 2 years following termination of employment.
B. Employee Agreements Not to Solicit their Employer’s Customers and Employees Aren’t Subject to the Limitations on Noncompetition Agreements.
ORS 653.295(4) specifically exempts employee agreements not to solicit or to transact business with an employer’s customers and to refrain from soliciting other employees to leave the employer’s employment after their employment terminates. Since the principal purpose of most employee noncompetition agreements is to prevent an employee from taking customers and employees with them when they leave their employer, their agreement not to solicit or to transact business with their employer’s customers or to solicit their employer’s employees after termination of their employment will generally meet the employer’s needs as well as a noncompetition agreement.