Oregon legislature curtails employee non-competition and arbitration agreements

By Stacey Mark
July 3, 2007

At the end of its 2007 session, the Oregon legislature passed a bill that imposes significant new restrictions on employee arbitration and non-competition agreements.  If the governor signs Senate Bill 248 into law, both arbitration and non-competition agreements between employers and employees will be unenforceable unless (1) the employer informs the employee of the agreement by a written offer received at least two weeks before the first day of employment, or (2) the agreement is entered into upon subsequent bona fide advancement of the employee. 

In addition, aside from some restrictions specific to the broadcast industry, non-competition agreements will not be enforceable at all unless

  • the employee is exempt from overtime pay under ORS 653.020(3),
  • the employee has access to trade secrets or other competitively sensitive business information, and
  • the employee's annual gross compensation at termination exceeds the median family income for a four-person family under Census Bureau guidelines. 

The bill provides that non-competition agreements will not be enforceable for a period longer than two years.

The new law says that the foregoing restrictions do not apply to employee or customer nonsolicitation agreements.  But it is unlikely that courts would uphold such nonsolicitation agreements where the employer is unable to show a protectable interest or that the restrictions as to time and/or scope are reasonable.

The new law will apply to arbitration and non-competition agreements entered into on or after January 1, 2008.

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