Over the past several years, Oregon's legislature has whittled away at non-competition agreements with the focus on increasing employee mobility and autonomy. Non-competition agreements were once again a target for the legislature in 2021.
On May 21, 2021, Governor Brown signed SB 169 modifying the requirements for enforceable non-competes within the state. These modifications become effective January 1, 2022.
While employers may still enter into non-competes with eligible employees, SB 169 creates new challenges for Oregon employers and adds complexity for multi-state employers to the piecemeal landscape of non-compete law across the country.
What Does SB 169 Change?
First, SB 169 creates a gross salary floor of $100,533 for employees who may enter into a non-competition agreement. In other words, to enter into such an agreement, an employee's annual gross salary and commission at the time of their termination must exceed this amount, which will be adjusted annually for inflation. A purported non-compete agreement with an employee whose annual compensation is below this threshold at the time of their termination is void.
Second, SB 169 shortens the term of a valid non-compete agreement to 12 months, down from 18 months. Third, agreements that are not in compliance with SB 169's provisions will be void, instead of voidable. Finally, SB 169 codifies the requirement that all non-competition agreements be in writing (as opposed to oral or otherwise implied).
Best Practices for Oregon Employers
SB 169's requirements apply only to agreements entered into on or after January 1, 2022, so employers do not need to worry about overhauling currently-existing non-competes. However, now is a good time to begin preparing for these upcoming changes.
When considering whether to enter into a non-competition agreement with a new or existing employee, employers should consider the following:
- Review terms of any new or form non-competes to ensure compliance with SB 169 and other laws.
- Make sure all non-competes are memorialized in writing.
- When a position does not meet the new salary threshold requirement, consider whether to increase the position's pay or whether to forego the non-compete altogether.
- Re-familiarize yourself with other aspects of non-compete requirements, including the definition of what is a "protectable interest" under the law.
As a refresher, a "protectable interest" is defined as when an employee:
- Has access to trade secrets, as defined under Oregon law;
- Has access to competitively-sensitive confidential business or professional information that otherwise would not qualify as a trade secret; or
- Is employed as an on-air talent by an employer in the business of broadcasting, and the employer meets certain requirements (including post-termination pay requirements and developmental/promotional requirements).
- Seek the advice of experienced counsel as to whether a proposed non-compete is acceptable, particularly in light of SB 169's act of making non-conforming agreements "void" instead of "voidable."
- Though not newly-created requirements under SB 169, now is a good opportunity to ensure that copies of signed non-competition agreements are properly maintained in employees' personnel files, and that a policy is in place to provide employees with a copy of their non-competition agreements within 30 days of their termination.