As we blogged about earlier, courts in most states just plain don’t like employee noncompete agreements. Particularly when it comes to mid- and low-level employees, courts worry that enforcing a noncompete agreement will hamper innovation, restrict competition, and unfairly burden a former employee’s ability to earn a living. For that reason, a court typically will review an noncompete’s justification, scope, and length with the judicial equivalent of a fine-tooth comb.
Courts have been picking away at the enforceability of employee noncompetes for years, but more recently, legislatures have jumped into the mix with varying levels of aggressiveness. California has long banned noncompetes outright, and several other states either have followed suit (e.g., North Dakota) or are considering whether to pass similar laws (e.g., Massachusetts, Washington). Still others have adopted laws that make it easier for employers to enforce noncompetes (e.g., Georgia), or are considering whether to do so to remedy past judicial reticence in the area (e.g., Wisconsin).
Oregon, however, sits somewhere in the middle. Pursuant to ORS 653.295 it allows employee noncompetes, but only subject to certain statutory restrictions. Until now, one such restriction was that the duration of the noncompete could be no more than two years. As we blogged about with respect to other areas, though, Oregonians like not to be outdone in areas in which other states also are active. So, Governor Kate Brown recently signed House Bill 3236, which reduced the permissible term of an employee noncompete from two years to 18 months. The legislative history indicates that the Oregon Legislature passed the law based largely on the longstanding critique that employee noncompetes are detrimental to innovation.
The new law applies only to noncompetes entered into after January 1, 2016, so your current employee noncompete agreements won’t be affected by it. Remember, though, that courts in Oregon and elsewhere have long required that, above all, noncompetes be reasonable. Many courts are loathe to “bluepencil” or modify an overbroad noncompete agreement, so make sure you comply with all requirements of the law.