August 2007

New Restrictions on Noncompete Agreements and Arbitration Clauses

On August 6th, Governor Kulongoski signed SB 248, a bill that impacts the use of noncompete agreements and arbitration clauses in employment contracts.

Under the new law, noncompetes and arbitration clauses will only be enforceable if entered into at the beginning of employment or upon bona fide promotion. For agreements upon employment, the employee must be sent a written employment offer stating a noncompete and/or arbitration is a condition of employment two weeks prior to the first day of employment.

Additional requirements for an enforceable noncompete agreement have also been outlined. There must be a protectable interest (confidential information or trade secrets) and a minimum annual salary above the median income for four person family – currently around $60,000. Paying the employee during the noncompete period can substitute for minimum salary. The maximum term of a noncompete is two years.

As with all laws, there are exceptions to the general rule. The new law will go into effect on January 1, 2008. If you are concerned about the enforceability of noncompete or arbitration agreements with your employees, please give SBH or your Oregon legal counsel a call.