ORS 653.295
Noncompetition agreements

bonus restriction agreements
applicability of restrictions

Text
Annotations 12

Mentioned in

Oregon Noncompete Agreement

Contracts Counsel, December 3, 2023

“Under Oregon law, continued employment is not adequate consideration for a non-compete agreement. Employees must be presented with some type of advancement to support sufficient consideration.”

Bibliographic info

How To Know if a Non-Compete Agreement Is Reasonable

LawDepot, October 17, 2023

“A Non-Compete Agreement restricts an employee from entering into competition with an employer after their employment period ends. Some Non-Compete Agreements can be unreasonable and limit your future job prospects.”

Bibliographic info

(1)

A noncompetition agreement entered into between an employer and employee is void and unenforceable unless:

(a)

Intentionally left blank —Ed.

(A)

The employer informs the employee in a written employment offer received by the employee at least two weeks before the first day of the employee’s employment that a noncompetition agreement is required as a condition of employment; or

(B)

The noncompetition agreement is entered into upon a subsequent bona fide advancement of the employee by the employer;

(b)

The employee is a person described in ORS 653.020 (Excluded employees) (3);

(c)

The employer has a protectable interest as described in subsection (2) of this section;

(d)

Within 30 days after the date of the termination of the employee’s employment, the employer provides a signed, written copy of the terms of the noncompetition agreement to the employee; and

(e)

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 $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. This paragraph does not apply to an employee described in subsection (2)(c) of this section.

(2)

For purposes of subsection (1)(c) of this section, an employer has a protectable interest when the employee:

(a)

Has access to trade secrets, as defined in ORS 646.461 (Definitions for ORS 646.461 to 646.475);

(b)

Has access to competitively sensitive confidential business or professional information that otherwise would not qualify as a trade secret, including product development plans, product launch plans, marketing strategy or sales plans; or

(c)

Is employed as an on-air talent by an employer in the business of broadcasting and the employer:

(A)

In the year preceding the termination of the employee’s employment, expended resources equal to or exceeding 10 percent of the employee’s annual salary to develop, improve, train or publicly promote the employee, provided that the resources expended by the employer were expended on media that the employer does not own or control; and

(B)

Provides the employee, for the time the employee is restricted from working, the greater of compensation equal to at least:

(i)

Fifty percent of the employee’s annual gross base salary and commissions at the time of the employee’s termination; or

(ii)

Fifty percent of $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.

(3)

The term of a noncompetition agreement may not exceed 12 months from the date of the employee’s termination. The remainder of a term of a noncompetition agreement in excess of 12 months is void and may not be enforced by a court of this state.

(4)

Subsections (1) and (3) of this section apply only to noncompetition agreements made in the context of an employment relationship or contract and not otherwise.

(5)

Subsections (1) and (3) of this section do not apply to:

(a)

Bonus restriction agreements, which are lawful agreements that may be enforced by the courts in this state; or

(b)

A covenant not to solicit employees of the employer or solicit or transact business with customers of the employer.

(6)

Nothing in this section restricts the right of any person to protect trade secrets or other proprietary information by injunction or any other lawful means under other applicable laws.

(7)

Notwithstanding subsection (1)(b) and (e) of this section, a noncompetition agreement is enforceable for the full term of the agreement, for up to 12 months, if the employer agrees in writing to provide the employee, for the time the employee is restricted from working, the greater of:

(a)

Compensation equal to at least 50 percent of the employee’s annual gross base salary and commissions at the time of the employee’s termination; or

(b)

(8)

As used in this section:

(a)

“Bonus restriction agreement” means an agreement, written or oral, express or implied, between an employer and employee under which:

(A)

Competition by the employee with the employer is limited or restrained after termination of employment, but the restraint is limited to a period of time, a geographic area and specified activities, all of which are reasonable in relation to the services described in subparagraph (B) of this paragraph;

(B)

The services performed by the employee pursuant to the agreement include substantial involvement in management of the employer’s business, personal contact with customers, knowledge of customer requirements related to the employer’s business or knowledge of trade secrets or other proprietary information of the employer; and

(C)

The penalty imposed on the employee for competition against the employer is limited to forfeiture of profit sharing or other bonus compensation that has not yet been paid to the employee.

(b)

“Broadcasting” means the activity of transmitting of any one-way electronic signal by radio waves, microwaves, wires, coaxial cables, wave guides or other conduits of communications.

(c)

“Employee” and “employer” have the meanings given those terms in ORS 652.310 (Definitions of employer and employee).

(d)

“Noncompetition agreement” means a written agreement between an employer and employee under which the employee agrees that the employee, either alone or as an employee of another person, will not compete with the employer in providing products, processes or services that are similar to the employer’s products, processes or services for a period of time or within a specified geographic area after termination of employment. [1977 c.646 §2; 1983 c.828 §1; 1985 c.565 §85; 2005 c.22 §459; 2007 c.902 §2; 2015 c.429 §1; 2019 c.121 §1; 2021 c.75 §1]

Source: Section 653.295 — Noncompetition agreements; bonus restriction agreements; applicability of restrictions, https://www.oregonlegislature.gov/bills_laws/ors/ors653.html.

Notes of Decisions

“Initial employment”, for purposes of this section, means when the employe starts work. Olsten Corp. v. Sommers, 534 F Supp 395 (1982)

In action to enforce noncompetition covenant, where evidence showed defendants spent part of their time contacting existing customers of plaintiff and as result of these contacts customers were more likely to come to defendants initially and that when defendants formed their own business 14 of their 27 customers were former clients of plaintiff, defendant’s customer contracts gave plaintiff legitimate interest entitled to protection by noncompetition agreement. Olsten Corp. v. Sommers, 534 F Supp 395 (1982)

This section precluded enforcement of noncompetition agreement not entered into at time of employe’s initial employment. Pacific Veterinary Hospital v. White, 72 Or App 533, 696 P2d 570 (1985)

Agreement prohibiting employee from soliciting businesses targeted for marketing by employer is noncompetition agreement. Dymock v. Norwest Safety Protective Equipment for Oregon Industry, Inc., 334 Or 55, 45 P3d 114 (2002)

Employee refusing to sign unenforceable noncompetition agreement is not pursuing employment-related right. Dymock v. Norwest Safety Protective Equipment for Oregon Industry, Inc., 334 Or 55, 45 P3d 114 (2002)

“Bona fide advancement” means job content and responsibilities of employee materially increase and status of employee within company improves. Nike, Inc. v. McCarthy, 379 F3d 576 (9th Cir. 2004)

Where employee contracts to work for same employer for period subsequent to scheduled termination of employment, whether contract period is new “initial employment” depends on whether employment capacity during contract period substantially differs in nature from employment capacity prior to termination. McGee v. Coe Manufacturing Co., 203 Or App 10, 125 P3d 26 (2005)

As used in this section, “voidable” means that employee who wants to be relieved of what employee believes to be unenforceable noncompetition obligation must take affirmative steps to invalidate that obligation; otherwise, obligation remains valid. Bernard v. S.B., Inc., 270 Or App 710, 350 P3d 460 (2015), Sup Ct review denied

Plaintiff employee’s failure to take steps to void noncompetition agreement, where noncompetition agreement was executed in violation of two-week notice requirement, precludes plaintiff’s claim for intentional interference with economic relations. Bernard v. S.B., Inc., 270 Or App 710, 350 P3d 460 (2015), Sup Ct review denied

Term “customers of the employer” refers to persons with active or ongoing relationship with employer, and noncompetition agreement that is overly broad in applying to persons who are not current customers may be enforced with respect to persons who are current customers of employer if agreement contains severability clause. Oregon Psychiatric Partners v. Henry, 293 Or App 471, 429 P3d 399 (2018)

Once employee takes affirmative steps manifesting intent to treat noncompetition agreement as void, employer has burden of proving enforceability of agreement. Oregon Psychiatric Partners, LLP v. Henry, 316 Or App 726, 504 P3d 123 (2022)

Law Review Citations

58 OLR 336 (1979); 88 OLR 515 (2009)

California:	Codes
Colorado:	C.R.S.
Nevada:	NRS
New York:	Laws
Oregon:	OAR, ORS
Texas:	Statutes
World:	Rome Statute, International Dictionary

ORS 653.295 Noncompetition agreements