It is prohibited for a former employee to compete with their current employer for a particular time after signing a non-competition agreement (also known as a non-compete agreement). As a result, the employee’s access to private information and trade secrets during their employment is protected. As a result, your business has less risk, and your intellectual property is shielded from unauthorized use or disclosure.
At the beginning of their employment, many businesses ask new hires to sign a non-compete agreement. The employer then makes the agreement a stand-alone contract or includes it in a broader employment agreement. The non-competition wording should be written in such a way that it can be appropriately identified and prominently shown to the reader. If this clause is contested in court, it may be rendered unenforceable if it is hidden. Having workers sign non-compete clauses should be done openly by the employer.
Each non-competition agreement has a specific time frame and geographic area covered by it. Workers and employers may agree, for example, that a former employee is not permitted to work for a rival in a particular state for up to one year after termination.
What Is a Non-Competition Agreement For?
Trade secrets and goodwill by the organization for which the employee worked are two of the fundamental grounds for the creation of non-competition agreements. A business puts a lot of resources into training and developing a new employee. This investment is aimed to assist that organization, not a rival that may profit if the employee resigns and joins the rival.
Additionally, non-competition agreements are meant to preserve the employee’s unique knowledge that they gained while working for the company. Non-competition agreements may be required for employees who have access to intellectual property, designs, or trade secrets. This lessens the impact of losing a key employee to a competitor. It also reduces the risk of violation of a patent or copyright.
Non-Competition Agreements in Oregon Law
During the last several years, significant legislative limitations on non-compete agreements have been implemented by the State of Oregon. After Governor Kate Brown signed Senate Bill No. 169 (“SB 169”) into law on May 21, 2021, Oregon’s existing limitations on non-competition agreements tightened:
- For non-competition agreements, the new legislation deems them “invalid and unenforceable” until the statutory criteria have been satisfied rather than making them “voidable.”
- From 18 months to 12 months, the new rule reduces the maximum length of non-competition restrictions. Covenants not to recruit workers or customers are exempt from the agreements.
- Non-competition agreements may now be enforced if an individual’s yearly income exceeds $100,533, updated annually for inflation. However, the previous version of the law utilized the US Census Bureau’s median household income to determine eligibility for a family of four. Covenants not to recruit workers or customers are exempt from this rule.
As a result of these changes, a non-compete agreement can be enforced for up to 12 months if an employer agrees in writing to provide an employee with the greater of at least 50 per cent of the employee’s annual gross base salary and commissions, or 50 per cent of $100,000 (adjusted annually for inflation), during the period of restriction.
SB 169 amends and tightens the restrictions while also establishing new standards for non-compete agreements in Oregon.
If you are contemplating signing an employment agreement containing a covenant not to compete or considering leaving your present employer but are unsure of your rights and duties under your employment agreement(s), be sure to contact an experienced Oregon employment attorney.
At Meyer Stephenson, we can help you with any issues you have with non-competition agreements. Feel free to contact us if you are confused about signing a non-competition agreement. When it comes to upholding your rights as an employee, we have your back.