Oregon’s Senate Bill 169, signed May 21, 2021 strengthens Oregon’s existing restrictions on noncompete agreements. Unlike Oregon’s 2019 law which imposed new notice requirements on employers seeking to enter into enforceable noncompetes, Senate Bill 169’s changes are more subtle though just as impactful.
Previously, noncompete agreements which failed to comply with Oregon’s statutory requirements were “voidable.” Senate Bill 169 declares noncompliant noncompetes entered into after January 1, 2022 “void” ab initio. This seemingly minor change may carry significant legal consequence if it ends up reducing the circumstances in which a former employer can sue for tortious interference.
Other changes in Senate Bill 169 include a reduction in the maximum enforceable length of a noncompete from 18 months to 12 months and a new formula for determining the minimum compensation an employee must be paid to be subject to a noncompete. Previously, Oregon employers could only bind employees earning at least the median family income for a four-person family as determined by the most recent available census information to be bound by a noncompete. Under Senate Bill 169, employees must make at least $100,533.00 in 2021 dollars adjusted for inflation to be subject to a noncompete.
Significantly, SB 169 maintains Oregon’s “garden leave” option to enforce otherwise noncompliant noncompetes. This permits employers to enforce otherwise unenforceable noncompetes for up to a year provided the agreement provides in writing that the former employee will be paid the greater of at least 50% of their gross annual base salary and commissions at the time of termination or 50% of $100,533.00 in 2021 dollars adjusted for inflation.
Senate Bill 169 applies to agreements entered into on or after January 1, 2022. Employers should take steps to ensure that their restrictive covenants for Oregon employees comply with Senate Bill 169 in advance of this effective date.