Are Non-Compete Agreements Valid?

Oregon employers may choose to enter into a “non­compete” agreement with key employees or those employees with access to sensitive or propriety information. In determining whether a non­competition agreement is valid, courts assess the following questions:

  1. Does the agreement protect a legitimate interest of the employer?
  2. Is the agreement too restrictive in terms of its duration? Is the agreement limited to the amount of time necessary to reasonably protect the employer?
  3. Is the agreement too restrictive in terms of the geographic boundaries specified? Is the agreement limited to the geographic areas necessary to reasonably protect the employer?
  4. Is the agreement supported by good consideration? In other words, was the agreement entered into upon the initial employment of the employee or upon advancement of the employee with the employer?

Non­compete agreements are prohibited in some states (e.g. California), and employers should consult with an employment attorney prior to implementing any agreement that imposes limits an employee’s future livelihood. Employers may protect trade secrets or other proprietary information by injunction or any other lawful means. Oregon law also permits “bonus restriction agreements” designed to limit or restrain competition by an employee after termination of employment. If an employee violates such an agreement, the employer may require the employee to forfeit profit sharing or other bonus compensation not yet paid. These agreements are permitted when an employee has substantial involvement in management, personal contact with customers, or knowledge of trade secrets. Bonus restriction agreements must be reasonably limited to “a period of time, a geographic area and specified activities.”

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