In today’s labor market, it’s only natural that employers look to a variety of tools to help incentivize employees to stick around – competitive wages and salaries, robust benefit packages, good working environment and noncompetition agreements… hold on, noncompetition agreements? Not necessarily. While it is true that a noncompetition agreement (“noncompete”) serves to protect certain interests of the employer, it must meet a strict set of standards in Oregon to actually be useful – read on to see whether you should consider entering into a noncompete with your employees or not.
For any noncompete to actually work, it must meet the following criteria:
- For prospective employees, you must inform in writing at least two weeks before the first day of employment that a noncompete is required.
- For current employees, you can only offer a noncompete in conjunction with a bona fide advancement.
- Protectable interest: A noncompete is only valid if you, as employer, have something to protect… in Oregon, that means, you must have access to:
- trade secrets;
- competitively sensitive confidential business or professional information; or
- are involved in on-air talent in broadcasting.
- Limitations: The noncompete can’t exceed 12 months from the date of termination. Anything more than that will be considered void by a court in Oregon.
- Job description: Is your employee/prospective employee salaried exempt?
- Gross salary: In most cases, your employee must gross $100,533 annually at the time of termination (this amount will adjust annually for inflation).
Note:If you still want an enforceable noncompete but your employee doesn’t meet the ‘job description’ or ‘gross salary’ requirements above, you must agree in writing to provide the greater of either at time of termination:
- Compensation equal to at least 50% of the employee’s annual gross base salary (and commissions) at time of termination; or
- 50% of $100,533 (again, adjusted annually for inflation).
Remember:You must provide a signed, written copy of the terms of the noncompete to the employee within 30 days after the date of the employee’s termination.
Lastly: a good reminder is that these rules above only apply to noncompetition agreements – not confidentiality agreements or non-solicitation agreements. It used to be that a challenge to a noncompete was ‘voidable’ but as of January 1, 2022, any noncompete that does not meet the above criteria is now void.
Sometimes, a noncompete is the right tool to protect what you have worked so hard to build. Sometimes, it isn’t. Let me know if you would like to talk about what is right for your business.