2015 ORS 653.295¹
Noncompetition agreements
  • bonus restriction agreements
  • applicability of restrictions

(1) A noncompetition agreement entered into between an employer and employee is voidable and may not be enforced by a court of this state unless:

(a)(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 used in this paragraph, an employer has a protectable interest when the employee:

(A) Has access to trade secrets, as that term is 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:

(i) 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

(ii) Provides the employee, for the time the employee is restricted from working, the greater of 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 50 percent of the median family income for a four-person family, as determined by the United States Census Bureau for the most recent year available at the time of the employee’s termination; and

(d) 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 the median family income for a four-person family, as determined by the United States Census Bureau for the most recent year available at the time of the employee’s termination. This paragraph does not apply to an employee described in paragraph (c)(C) of this subsection.

(2) The term of a noncompetition agreement may not exceed 18 months from the date of the employee’s termination. The remainder of a term of a noncompetition agreement in excess of 18 months is voidable and may not be enforced by a court of this state.

(3) Subsections (1) and (2) of this section apply only to noncompetition agreements made in the context of an employment relationship or contract and not otherwise.

(4) Subsections (1) and (2) 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.

(5) 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.

(6) Notwithstanding subsection (1)(b) and (d) of this section, a noncompetition agreement is enforceable for the full term of the agreement, for up to 18 months, if the employer provides 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) Fifty percent of the median family income for a four-person family, as determined by the United States Census Bureau for the most recent year available at the time of the employee’s termination.

(7) 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 an agreement, written or oral, express or implied, 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]

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 Ctreview 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

Law Review Cita­tions

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

Chapter 653

Atty. Gen. Opinions

Wage and Hour Commission jurisdic­tion to regulate govern­mental entity's employ­ment of mi­nors, (1979) Vol 39, p 489


1 Legislative Counsel Committee, CHAPTER 653—Minimum Wages; Employment Conditions; Minors, https://­www.­oregonlegislature.­gov/­bills_laws/­ors/­ors653.­html (2015) (last ac­cessed Jul. 16, 2016).
 
2 Legislative Counsel Committee, Annotations to the Oregon Revised Stat­utes, Cumulative Supplement - 2015, Chapter 653, https://­www.­oregonlegislature.­gov/­bills_laws/­ors/­ano653.­html (2015) (last ac­cessed Jul. 16, 2016).
 
3 OregonLaws.org assembles these lists by analyzing references between Sections. Each listed item refers back to the current Section in its own text. The result reveals relationships in the code that may not have otherwise been apparent.