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5 statutory requirements for a valid noncompete agreement

On Behalf of | Jan 13, 2021 | Business & Commercial Law

Hiring managers and business executives regularly struggle to recruit and retain top talent. If you do not want your employees to leave and start a competing venture or work for a competitor, you may ask them to sign a noncompete agreement.

If the noncompete agreement is not legally valid, a court may choose to void it or otherwise not enforce it. In addition to some common law requirements, Oregon law requires valid noncompete agreements to satisfy five statutory elements.

1. Notification

You must notify employees who are subject to noncompete agreements two weeks before they begin employment. Alternatively, you can notify workers of the requirement before a promotion, provided the promotion is legitimate and not for the purpose of securing a noncompete agreement.

2. Classification

Your noncompete agreement may only apply to employees who are exempt from the Fair Labor Standards Act. Among other requirements, this means you must pay the employee a salary rather than an hourly wage.

3. Interest

You must also have some business interest you need to protect with the noncompete agreement. Although there are exceptions, an employee who falls under a noncompete agreement typically must have access to company secrets or proprietary information.

4. Income

For the noncompete agreement to be enforceable, the employee who is subject to it must earn at least the median income for a family of four. The U.S. Census Bureau determines this amount.

5. Second notification

Finally, if you ever want to enforce a noncompete agreement, you must send a second notice about the agreement to employees after termination. Oregon law requires you to provide this notification within 30 days after employment ends.