§ 24.5 Violation of Covenants Not to Compete

• Library: Damages (OSBar) (2016 Ed.)

§ 24.5 VIOLATION OF COVENANTS NOT TO COMPETE

A covenant not to compete, or a noncompetition agreement, is an agreement that an employee "will not compete with the employer in pro-viding 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." ORS 653.295(7)(d). That statute was amended in 2015, effective January 1, 2016. Or Laws 2015, ch 429. A noncompetition agreement entered into on or after January 1, 2016, is voidable and may not be enforced by a court in Oregon unless:

(1) The employer either gives the employee at least two weeks' notice in a written employment offer that a noncompetition agreement is required or enters into the agreement upon the employee's subsequent bona fide advancement;

(2) The employee is engaged in administrative, executive, or professional work; performs predominantly intellectual, managerial, or creative tasks; exercises discretion and independent judgment; and is paid on a salary basis;

(3) The employer has a protectable interest, as defined by the statute; and

(4) Unless the employee is a certain type of "on-air talent" in the broadcasting business, the employee's total annual compensation including commissions at termination exceeds the median family income for a four-person family, as determined by the most recent available data from the US Census Bureau.

ORS 653.295(1). Additionally, noncompetition agreements signed on or after January 1, 2016, may not restrict employment for more than 18 months from the date of the employee's termination. Any excess time period after 18 months is voidable and may not be enforced by a court in Oregon. ORS 653.295(2). For noncompetition agreements signed on or after January 1, 2008, and before January 1, 2016, the maximum time period is two years. ORS 653.295(2) (2009); see Or Laws 2007, ch 902, §§ 3, 5. Noncompetition agreements signed before January 1, 2008, need only be signed upon initial employment or a bona fide advancement. ORS 653.295(1) (2005).

Even when the employer lacks an enforceable noncompetition agreement, the statute explicitly provides that it does not "restrict[] the right of any person to protect trade secrets or other proprietary information by injunction or any other lawful means under other applicable laws." ORS 653.295(5); see, e.g., ORS 646.461-646.475 (Uniform Trade Secrets Act).

§ 24.5-1 Remedies

For a breach of a noncompetition agreement, an Oregon court may award the employer damages, lost profits, or injunctive relief. See N. Pac. Lumber Co. v. Moore, 275 Or 359, 365-67, 551 P2d 431 (1976); see also Olsten Corp. v. Sommers, 534 F Supp 395, 399 (D Or 1982). If lost profits are sought under a noncompetition covenant, presumably recovery must be limited to the term of the covenant.

Injunctive relief is granted if the employer has a sufficient pro-tectable interest and seeks to impose reasonable restrictions on the former employee's future activities. The restrictions must be reasonable in duration and territory under the circumstances of the particular case, be supported by adequate consideration, and meet the tests of ORS 653.295. See Cascade Exch., Inc. v. Reed, 278 Or 749, 754-55, 565 P2d 1095 (1977); Rem Metals Corp. v. Logan, 278 Or 715, 720, 565 P2d 1080 (1977); Mail-Well Envelope Co. v. Saley, 262 Or 143, 154-55, 497 P2d 364 (1972); McCombs v. McClelland, 223 Or 475, 480, 354 P2d 311 (1960). Injunctive...