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The gradual demise of business non-compete agreements

On Behalf of | May 23, 2022 | Business & Commercial Law

Although many business owners consider non-compete agreements essential for maintaining their company’s position in the marketplace, many states are now reconsidering the enforceability of these contracts. Oregon leads the growing number of states seeking to loosen these agreements’ restrictive boundaries.

Oregon’s strict stance on business non-compete contracts impacts the following areas.

Enforcement period

In most states, key executives can expect to avoid working for their former companies’ competitors for about two to five years after their departure. However, Oregon’s most recent restriction period of 18 months is now 12 months, a significant reduction.

Applicable salaries

The new law raises the employee earnings threshold for an enforceable Oregon non-compete contract from $97,311 to $100,533. In addition, employers may pay qualifying employees 50 percent of their most recent salaries for honoring non-compete contract provisions for one year. The law also considers threshold adjustments to keep pace with inflation.

In addition, employers who want to ensure that non-qualifying employees do not compete must agree in writing to provide them with at least 50 percent of the $100,533 salary for one year.

Challenges

Rather than requiring departing employees to initiate challenges to non-competes, the new laws now automatically void and render unenforceable any agreements that do not meet the state’s rules, including when and how employers make them available to employees.

Oregon business owners must remember that the new laws only restrict former employees from providing products, processes or services that would compete in the same regions as their former employers. However, the regulations do not prevent employees from harming their former companies by soliciting remaining team members or sharing information only accessible during their employment period.

New non-compete laws are also now enforceable by the federal government, making it possible that non-competes may eventually disappear.