Exceptions to 2008 Oregon Non-compete Law

The Oregon non-compete law prohibits noncompetition agreements between employers and hourly workers, in almost all cases.

 

However, under this new law, employers are still permitted to have management and sales employees sign non-compete agreements. The agreements limit the employee’s ability to work for a competitor, at least for a period of time.

 

Such non-compete agreements – even voluntary ones – are illegal when applied to hourly or salaried non-exempt employees under Oregon law.

 

The law set limits on the type of non-compete agreements that employers can enforce, even with management employees. The employee must receive the non-compete agreement in writing at least two weeks before his or her first day of work.

 

The agreements are only enforceable if the employer has a “protectable” interest. Such interests include:

 

  1. Trade secrets
  2. Product development plans
  3. Product launch plans
  4. Marketing strategy
  5. Sales plans

 

In addition, the law permits enforcement of a non-compete agreement when the employee is on-air talent (such as a talk show host or newscaster) and the employer has spent an amount equal to 10% or more of the employee’s annual salary promotion, training or developing the employee. However, the broadcast company must pay on-air talent 50% of their salary or 50% of the annual median income for a family of four, for the length of the agreement.

 

An employer can enforce a non-compete agreement if the employer is willing to pay the employee at least 50% of the employee’s base salary for the length of the agreement or 50% of the median income for a family of four in Oregon.

 

The law, enforced by the Oregon Bureau of Labor and Industry, still permits employers to have salespersons and others sign an agreement prohibiting a former employee from revealing or contacting customers of the former employer.

 

In an unrelated move, Labor Commissioner Gardner has since resigned to serve as a union lobbyist in Washington, D.C. Gov. Ted Kulongoski selected Democratic Senator Brad Avakian of Bethany to become the state Labor Commissioner

 

According to the Oregonian newspaper, at an afternoon news conference at the Portland State Office Building, the governor praised Gardner’s six-year stewardship of the Bureau of Labor and Industries and said Avakian “has the big shoes” to fill the job.

 

 

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18 Thoughts on “Exceptions to 2008 Oregon Non-compete Law”

May 9, 2009 at 3:46 pm

How does this relate to volunteer teams where the people are not being paid, and therefore are not “employees” but are working with project specific development intellectual property?

Amelia

May 9, 2009 at 8:32 pm

Hi Laurene! It probably doesn’t. The Oregon law cited severely limits the employers ability to enforce a non-compete agreement in court — because such agreements limit the employees ability to earn a living. It would be very, very unusual for an employer to require volunteers to sign a non-compete agreement, stating that they will not seek work with one of your competitors for a specified amount of time. Such an agreement would also almost certainly be unenforcable. You could certainly request that volunteers sign a non-dicscloure agreement, specifying that they will not disclose your intellectual property to others. But frankly, if the details of this project are that confidential, you probably should be entrusting them only to paid employees, and not volunteers. HTH, and thanks for reading the blogs!~ Amelia

June 2, 2009 at 2:30 pm

If a salaried-exempt employee has a non-compete clause, terminates employment to preserve integrity/position within the specific business community due to discovered fraud/misappropriation of funds within the business, would sufficient grounds exist for the employee to break the clause without penalty?

Amelia

June 2, 2009 at 2:53 pm

Hi Ron! That’s an interesting question, and one that does not have a definitive answer at this time. The new Oregon non-compete regulations make no mention of the reason the employee quits. Our advice is that you consult an attorney about your specific circumstances. HTH, and thanks for reading the blogs!~ Caitlin

Patrick

June 20, 2009 at 2:51 am

I left a company, where I was a salaried sales person, after they restructured my contract (took away all base pay, made it commission only). I had a non-compete, and have found finding a job outside my area of expertise futile. I have had several offers of employment in my field, but have had to decline due to the non-compete. Is there a way around this?

Amelia

June 20, 2009 at 4:57 am

Hi Patrick! You need to consult an attorney. As mentioned in the article above, many non-compete agreements are unenforcable in Oregon because they limit the employee’s ability to earn a living, and to support his or her family. But we cannot give you advice about an agreement we have never seen. HTH, and thanks for reading the blogs!~ Amelia

Joe

July 9, 2009 at 8:45 pm

Hello, I am considering resigning from my current position as a consultant to go into business consulting for myself. I have signed a non-compete and actually have been offered a consultation job by several of my soon to be former clients. My livelyhood has been in consulting. If I do this, what are the ramifications, and in particular, if my company chooses to enforce it, the above article states that for Oregon they have to pay me 50% of my wages. Is this accurate?

Amelia

July 9, 2009 at 10:42 pm

Hi Joe! It is true that Oregon non-compete agreements are increasingly difficult to enforce, especially for hourly or non-exempt employees. The article you are referencing refers specifically to agreements between hourly workers and Oregon employers. If you are a consultant, you are probably either an exempt salaried worker or an independent contractor. So this article may not apply to you at all.
Before you do anything rash, we suggest that you have an attorney look over your non-compete agreement. A non-compete agreement is a contract, and it is impossible for us to give an opinion on any contract we have never seen. Besides, we don’t give legal advice at all. HTH, and thanks for reading the blogs!~ Amelia

Louise

October 2, 2009 at 7:31 pm

Hi, seeing that I do not live in Oregon, I need some help interpreting this law. I currently work for a company as an independent contractor and is based commission only paid to my fed id number. i have a non-compete signed with a company that states we agree to have the contract under Oregon law as that is where they are based. can you explain the non-compete law for this type of situation and if they can impose a time limit and geographical location? and if so how long, and what kind of geographical limits. thanks.

Amelia

October 3, 2009 at 5:56 am

Hi Louise! Any non-compete agreement that you signed is a contract, and it is really, really hard for us — or for anyone — to give you accurate information on a contract that we have not read.
We will say that a non-compete agreement that affects a commissioned salesperson, a restricted geographical area and a short period of time is going to be more enforcable. But we cannot speak to whether your particular non-compete agreement is enforcable or not. Only an attorney familiar with Oregon law can. HTH, and thanks for reading the blogs!~ Amelia

ellis

November 2, 2009 at 12:48 pm

Hi….. 25 years ago I bought a franchise and over the years it has become increasingly difficult to work with the franchisor. They provide little support and have gone so far as to do business in my territory, which I thought was protected from them. I could go on for hours with all the things they do and don’t do. I have a C corp that owns the franchise but
in the licensing agreement is a non-compete that applies to me as the licensee. I can’t do the same business for 1 year and within 50 miles of my office. There is a buy out provision but it would be impossibly expensive the way it is structured. My question is does the change in the non-compete laws in Oregon help my situation?
Thank you,
Ellis

Amelia

November 2, 2009 at 3:18 pm

Hi ellis! Unfortunately, the new Oregon laws probably do not have any impact whatsoever on your situation, because you are not an employee. You are a business owner who freely entered into a contract. Now you want out of that contract. Our suggestion is that you consult an attorney who specializes in corporation law. Obviously, we cannot comment on a specific contract that we have never read. HTH, and thanks for reading the blogs!~ Amelia

Stacie

August 10, 2010 at 4:51 pm

Hello, Does a non compete clause apply to the state you work or the state the company is headquartered in? Example, my husband is an hourly employee that lives and works in Oregon. His company is headquartered in Washington and they are trying to enforce and non-compete clause. Thanks

Amelia

August 10, 2010 at 5:24 pm

Hi Stacie! The noncompete clause usually applies to the state or area where the employee works. It would not do much good for a California employer to forbid an Alabama employee from competing in California.

However, it may be that your question is really “do the laws of Oregon or Washington apply to my husband?” If he is working at an Oregon branch office of a company with headquarters in Washington, Oregon law probably applies. (Sometimes employment agreements specify which state’s laws apply.) As you know, an Oregon noncompete agreement signed after January 1, 2008 is pretty much unenforcable if the employee is hourly.

It may be that the employer is just trying to intimidate your husband. Otherwise, your husband might want to consult an attorney in Oregon. HTH, and thanks for reading the blogs!~ Amelia

Kent Cannon

October 27, 2010 at 2:52 pm

I went to work as an estimator for a contractor in 2002 in an hourly capacity. After two years the owners moved out of the country. I was elevated to the GM position but the original non compete was left in place with no changes. When the economy went south, I was terminated and the owner took over in my capacity. One of the other employees was given my original job as estimator. Am I able to seek non salaried work in the same industry here in Oregon in the capacity of estimator that I was originally hired for prior to being made GM and thus becoming an exempt employee?

Amelia

October 27, 2010 at 4:02 pm

Hi Kent! Since this article was published by Jolie, the Oregon courts continue to limit the enforcement of non-compete agreements. At this point, such agreements are almost unenforcable, especially against an emploeye who was laid off (rather than quitting to go to work for a competitor or being fired for misconduct.) From an HR perspective, such agreements are worth about as much as the paper they are written on.

It is even doubtful if the non-compete agreement would apply to you working as a GM, since you are probably not privy to info on a new product launch or other trade secrets and the agreement was signed before you were an exempt employee. Even if the agreement applied to you as an hourly employee, that term probably expired while you were working as GM. However, we have not seen your non-compete agreement and we do not give legal advice. For that reason, you may want to consult an attorney. Or, you may want to accept the job and consult an attorney only if the previous employer gives you grief. In general, judges in Oregon have recognized that workers have the right to accept a job in their chosen field to support themselves and their family. HTH, and thanks for reading the blogs!~ Amelia

vanniemay

December 19, 2010 at 2:17 am

Do you know how Oregon law relates to current employee being told they need to sign a non-compete agreement?

I have been working for a company for over two years, I have never sign a non-compete with them. When I got to work I was handed a four page agreement and told that I had to sign it or they wouldnt let me work. This agreement was only given to about 5 or 6 employees with over 20 doing the same job as I do.

Amelia

December 19, 2010 at 6:26 am

Hi vanniemay! There are two ways to look at this situation. One way is, this is probably not legal, which means the non-compete agreement could be voided. So, you might as well sign it — it’s signing a worthless piece of paper. Of course, you might have to hire an attorney and go to court at some point to prove the agreement was not enforceable.

The other option would be to contact an attorney or the Oregon Bureau of Labor and Industry before signing such an agreement. As you see from the article above, generally speaking, the employee must be given a non-compete agreement at least two weeks before the first day of work. It sounds like in this case the employer is trying to coerce you into signing the non-compete by not allowing you to work until it is signed, and not giving it to you with the job offer.

Because not everyone in the same job is being required to sign a non-compete agreement, this may be illegal discrimination based on race, color, sex, national ancestry, etc. For example, if most of the Hispanic employees were asked to sign while most African American employees were not, that would be illegal discrimination under federal law. You could file a complaint with the EEOC at http://www.eeoc.gov.

So our suggestions are in order: 1. Have a tactful, respectful conversation with your employer and tell the employer you do not believe the non-compete agreement is legal under Oregon law, specifically ORS 653.295. Print out the the information from the links below and give them copies. 2. Tell them you need at least two weeks for your attorney to review the agreement and you expect to work during those two weeks. (At this point, they may change their minds, rather than have an attorney involved.) 3. Tell them that you believe this action is illegal discrimination based on race, color, sex, religion, national ancestry, etc. under federal Title VII of the Civil Rights Act, because not every employee with the same job is being required to sign it. 4. Tell them that you don’t want to, but if you are terminated because you refuse to sign this agreement, you would have to file a lawsuit for wrongful termination. Emphasize that you would prefer to resolve this problem without getting attorneys, the Oregon BOLI or the EEOC involved.

Hopefully, the employer will see the light and agree that you do not have to sign this document. You could also file for unemployment benefits for any time you miss from work due to this issue, saying the emloyer asked you to do something illegal and laid you off when you refused. HTH, and thanks for reading the blogs!~ Amelia

Read more about Oregon non-competes at: http://www.williamskastner.com/uploadedFiles/Resources/Articles/SPetersNewLawDrasticallyAltertsNoncompeteRequirements.pdf
http://www.bullivant.com/New-legislation-eviscerates-non-competition-agreements-in
http://www.stoel.com/showalert.aspx?Show=2485

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