Chapter 902
AN ACT
SB 248
Relating to employment agreements; creating
new provisions; and amending ORS 36.620 and 653.295.
Be It Enacted by the People of
the State of
SECTION 1. ORS 36.620 is amended to read:
36.620. (1) An agreement contained in a record to submit to arbitration
any existing or subsequent controversy arising between the parties to the
agreement is valid, enforceable and irrevocable except upon a ground that
exists at law or in equity for the revocation of a contract.
(2) Subject to ORS
36.625 (8), the court shall decide whether an agreement to arbitrate exists or
a controversy is subject to an agreement to arbitrate.
(3) An arbitrator shall
decide whether a condition precedent to arbitrability has been fulfilled.
(4) If a party to a
judicial proceeding challenges the existence of, or claims that a controversy
is not subject to, an agreement to arbitrate, the arbitration proceeding may
continue pending final resolution of the issue by the court, unless the court
otherwise orders.
(5) A written
arbitration agreement entered into between an employer and employee and
otherwise valid under subsection (1) of this section is voidable and may not be
enforced by a court unless:
(a) The employer informs
the employee in a written employment offer received by the employee at least
two weeks before the first day of the employee’s employment that an arbitration
agreement is required as a condition of employment; or
(b) The arbitration
agreement is entered into upon a subsequent bona fide advancement of the
employee by the employer.
SECTION 2. ORS 653.295 is amended to read:
653.295. (1) A
noncompetition agreement entered into between an employer and employee is [void] voidable and may not be
enforced by [any court in] a court
of this state unless [the agreement
is entered into upon the]:
[(a) Initial employment of the employee with the employer; or]
[(b) Subsequent bona fide advancement of the
employee with the employer.]
(a)(A) The employer
informs the employee in a written employment offer received by the employee at
least two weeks before the first day of the employee’s employment that a
noncompetition agreement is required as a condition of employment; or
(B) The noncompetition
agreement is entered into upon a subsequent bona fide advancement of the
employee by the employer;
(b) The employee is a
person described in ORS 653.020 (3);
(c) The employer has a
protectable interest. As used in this paragraph, an employer has a protectable
interest when the employee:
(A) Has access to trade
secrets, as that term is defined in ORS 646.461;
(B) Has access to
competitively sensitive confidential business or professional information that
otherwise would not qualify as a trade secret, including product development
plans, product launch plans, marketing strategy or sales plans; or
(C) Is employed as an
on-air talent by an employer in the business of broadcasting and the employer:
(i) In the year
preceding the termination of the employee’s employment, expended resources equal
to or exceeding 10 percent of the employee’s annual salary to develop, improve,
train or publicly promote the employee, provided that the resources expended by
the employer were expended on media that the employer does not own or control;
and
(ii) Provides the
employee, for the time the employee is restricted from working, the greater of
compensation equal to at least 50 percent of the employee’s annual gross base
salary and commissions at the time of the employee’s termination or 50 percent
of the median family income for a four-person family, as determined by the
United States Census Bureau for the most recent year available at the time of
the employee’s termination; and
(d) The total amount of
the employee’s annual gross salary and commissions, calculated on an annual
basis, at the time of the employee’s termination exceeds the median family
income for a four-person family, as determined by the United States Census
Bureau for the most recent year available at the time of the employee’s
termination. This paragraph does not apply to an employee described in
paragraph (c)(C) of this subsection.
(2) The term of a
noncompetition agreement may not exceed two years from the date of the employee’s
termination. The remainder of a term of a noncompetition agreement in excess of
two years is voidable and may not be enforced by a court of this state.
[(2)] (3) [Subsection
(1) of this section applies] Subsections (1) and (2) of this section
apply only to noncompetition agreements made in the context of an employment
relationship or contract and not otherwise.
[(3)(a) Subsection (1)(a) of this section
applies only to noncompetition agreements entered into after July 22, 1977.]
[(b) Subsection (1)(b), subsections (4) and (5)
and subsection (6)(a) of this section apply to employment relationships and
bonus restriction agreements in effect or entered into after October 15, 1983.]
(4) [Subsection (1) of this section does] Subsections
(1) and (2) of this section do not apply to:
(a) Bonus restriction agreements, which are
lawful agreements that may be enforced by the courts in this state; or
(b) A covenant not to
solicit employees of the employer or solicit or transact business with
customers of the employer.
(5) Nothing in this
section restricts the right of any person to protect trade secrets or other
proprietary information by injunction or any other lawful means under other
applicable laws.
(6) Notwithstanding
subsection (1)(b) and (d) of this section, a noncompetition agreement is
enforceable for the full term of the agreement, for up to two years, if the
employer provides the employee, for the time the employee is restricted from
working, the greater of:
(a) Compensation equal
to at least 50 percent of the employee’s annual gross base salary and
commissions at the time of the employee’s termination; or
(b) Fifty percent of the
median family income for a four-person family, as determined by the United
States Census Bureau for the most recent year available at the time of the
employee’s termination.
[(6)] (7) As used in this section:
(a) “Bonus restriction
agreement” means an agreement, written or oral, express or implied, between an
employer and employee under which:
(A) Competition by the
employee with the employer is limited or restrained after termination of
employment, but the restraint is limited to a period of time, a geographic area
and specified activities, all of which are reasonable in relation to the
services described in subparagraph (B) of this paragraph;
(B) The services
performed by the employee pursuant to the agreement include substantial
involvement in management of the employer’s business, personal contact with
customers, knowledge of customer requirements related to the employer’s
business or knowledge of trade secrets or other proprietary information of the
employer; and
(C) The penalty imposed
on the employee for competition against the employer is limited to forfeiture
of profit sharing or other bonus compensation that has not yet been paid to the
employee.
(b) “Broadcasting”
means the activity of transmitting of any one-way electronic signal by radio
waves, microwaves, wires, coaxial cables, wave guides or other conduits of
communications.
[(b)] (c) “Employee” and “employer” have the meanings given
those terms in ORS 652.310.
[(c)] (d) “Noncompetition agreement” means an agreement,
written or oral, express or implied, between an employer and employee under
which the employee agrees that the employee, either alone or as an employee of
another person, will not compete with the employer in providing 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.
SECTION 3. The amendments to ORS 653.295 by section 2
of this 2007 Act apply to noncompetition agreements entered into on or after
the effective date of this 2007 Act.
SECTION 4. The amendments to ORS 36.620 by section 1 of
this 2007 Act apply to arbitration agreements entered into on or after the
effective date of this 2007 Act.
SECTION 5. Any noncompetition agreement entered into
before the effective date of this 2007 Act shall continue to be governed by ORS
653.295 as in effect immediately before the effective date of this 2007 Act.
Approved by the Governor August 6, 2007
Filed in the office of Secretary of State August 7, 2007
Effective date January 1, 2008
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