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Oregon Passed Bill on Non-Competes

The Oregon Legislature recently passed a new bill (SB 169) that will have a major impact on the use of non-competition agreements in Oregon. These amendments to Oregon’s existing non-competition statute, ORS 653.295, will become effective on January 1, 2022, and will apply to all Oregon non-competition agreements entered into on or after that date. The most significant changes to the statute are described below.

Under the law, non-competition agreements may not exceed 18 months. The amendments reduce the maximum term to only 12 months.

Under the current law, a non-competition agreement may not be enforced unless the total amount of the employee’s annual gross salary and commissions “calculated on an annual basis, at the time of the employee’s termination exceeds the median family income for a four-person family, as determined by the United States Census Bureau for the most recent year available at the time of the employee’s termination.” The amendments specify that the employee’s annual gross salary and commissions must exceed $100,533,” adjusted annually for inflation pursuant to the Consumer Price Index for All Urban Consumers, West Region (All Items), as published by the Bureau of Labor Statistics of the United States Department of Labor immediately preceding the calendar year of the employee’s termination.”

Under the current law, a non-competition agreement that does not meet the requirements of the statute are “voidable,” which Oregon courts have interpreted as requiring an employee to take affirmative steps to void the agreement. The amended law now specifies that non-compliant agreements are automatically presumed “void and unenforceable.”

The requirement, under current law, for employers to inform the employee in a written employment offer at least two weeks before the first day of the employee’s employment that a non-competition agreement is required as a condition of employment or that the non-competition agreement is entered into upon a subsequent bona fide advancement will remain in effect.

It should be noted that these amendments will not impact other types of restrictive covenants, such as confidentiality and non-solicitation agreements.

Employers should consult with legal counsel to prepare updated template agreements to ensure that their non-compete agreements contain the most up-to-date provisions for enforceability.

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