Oregon And Nevada The Newest States To Amend Noncompete Statutes, Bolstering Employee Protections – Employment and HR

United States:

Oregon and Nevada are the last states to change the non-compete clause and strengthen worker protection

August 11, 2021

Duane Morris LLP

To print this article, all you need to do is register or log in to Mondaq.com.

Oregon and Nevada recently changed their non-compete agreements to further restrict the circumstances in which employers can enforce a non-compete agreement against former employees. A summary of the changes follows.

Oregon

Oregon lawmakers made several material changes to the existing Oregon Non-Competition Act (ORS 653.295), enacted May 21, 2021.

The changes to ORS 653.295 apply to all non-compete agreements concluded before or after May 21, 2021. Neither the current nor the previous version of ORS 653.295 apply to confidentiality or non-solicitation restrictions. ORS 653.295 refers solely to “non-compete agreements”, defined as agreements “under which the employee agrees that the employee will not, alone or as an employee of any other person, compete with the employer in providing similar products, processes, or services Services provided by the employer for a specific period of time or in a specific geographical area after the employment relationship has ended.

Under the earlier version of the law, a non-compete clause was “contestable” and unenforceable unless:

• The employer has informed the employee in a written offer of employment at least two weeks before the employee’s first day of work that a non-competition clause is necessary or that the non-competition clause will be enforced in the event of a subsequent promotion in good faith;
• The employee is exempt from the Oregon Minimum Wage and Overtime Act;
• The worker earns more than the median family income for a family of four as determined by the United States Census Bureau;
• The non-competition clause may not exceed 18 months;
• The employer has an interest worthy of protection, even if the employee has or will have access to trade secrets or confidential information relevant to competition; and
• The employer provides the employee with a signed, written copy of the non-competition clause within 30 days of the termination of the employment relationship.

The changes change Oregon’s existing non-compete clause as follows:

• The law now provides that any non-compete agreement that does not meet the requirements of ORS 653.295 is “void” – in the previous version of the law, non-compete agreements were only “void” if they did not meet the legal requirements – and unenforceable. According to the amended version of the law, courts no longer have any leeway to interpret the term “invalid” in order to require employees to take positive steps (e.g. ORS 653.295 (1).
• According to the revised law, the maximum blocking period after termination of the employment relationship is now 12 months – reduced from 18 months. ORS 653.295 (7).
• Under the revised law, a non-compete agreement will only be enforced against an employee who earns $ 100,533 or more in salaries and commissions (adjusted for inflation annually) “immediately prior to the employee’s calendar year”. According to the earlier version of the law, a non-competition clause could be enforced against an employee who “calculates gross salary and commissions on an annual basis” at the time the employee is dismissed. [that] exceeds the median family income of a family of four as determined by the United States Census Bureau for the last available year at the time the employee was given notice. “ORS 653.295 (1) (e).
• According to the earlier version of the law, an employer could impose a non-competition clause on an employee who would otherwise be exempt from the threshold remuneration if the employer paid the employee the higher amount of compensation to at least 50 percent of (a) that for the period of incapacity for work annual gross base salary and the employee’s commissions at the time of the employee’s dismissal; or (b) the median family income of a family of four as determined by the United States Census Bureau at the time of the employee’s termination. The new version of the law now provides that the employer can only make use of this option if he gives the employee “written consent”, the higher of (1) compensation of at least 50 for the period of the employee’s incapacity for work. pay a percentage of the employee’s gross base salary and commissions at the time of the employee’s termination; or (2) $ 100,533 (adjusted annually for inflation) (in accordance with revised subsection (1) (e) above). ORS 653.295 (7). The new version of the law does not specify whether the agreement must be made “in writing” when the non-compete clause is concluded or at a later point in time (ie when the employment relationship is terminated). The new version of the law also does not specify the time frame for the payment (ie whether the payment must be made “in advance” in a lump sum, whether it can be made at intervals during the period of the restriction or whether it is made over a longer period).

Nevada

Nevada also recently made amendments to its Non-compete Statute (NRS 613.195) effective May 25, 2021.

The amendments do not change the basic provisions of the law that a non-compete clause is void and unenforceable unless it is (1) supported by valuable considerations; (2) does not impose any restraint necessary to protect the employer; (3) does not impose undue hardship on the employee; and (4) impose restrictions that are reasonable on the valuable consideration in support of the non-compete obligation.

The main legislative changes as part of the changes include:

• Explicit prohibition of the application of non-compete obligations for employees who are “only paid on an hourly basis, with no tips or gratuities”. NRS 613.195 (3);
• Added a fee shifting provision that would require a court to “award” an employee reasonable fees and costs if the court determines that the agreement is inadmissible: (1) applies to an hourly paid employee; and / or (2) prevents the employee from dealing with former customers whom the employee has not asked for. NRS 613.195 (7);
• Amendment to a law prohibiting a non-compete clause prohibiting a former employee from providing services to former clients in the circumstances described in NRS.613.195 (2) (a) – (c) to clarify that an employer is prohibited from doing so bring a lawsuit to enforce such restriction; and
• Clarification that a court must “revise” an overly broad restrictive agreement in order to make it reasonable, regardless of whether the employer is bringing an enforcement action or an employee is bringing an action to challenge it. NRS.613.195 (2).

For more informations

If you have any questions about this notice, please contact Lawrence H. Pockers, Shannon Hampton Sutherland, Emily Kowey Roth, one of the attorneys in our Non-Competition and Trade Secrets group, one of the attorneys in our Employment, Labor Law, Benefits and Practice Group Immigration or the lawyer of the law firm with which you are in regular contact.

Disclaimer: This warning is prepared and posted for informational purposes only and is not offered as legal advice, nor should it be construed as such. For more information, see the firm’s full disclaimer.

POPULAR ARTICLES ON: United States Employment and Workers

Another round of changes to the Illinois Equal Pay Act

Taffeta Stettinius & Hollister

Just over three months ago, on March 23, 2021, Illinois Governor JB Pritzker signed Senate Act 1480 amending the Illinois Human Rights Act, the Illinois Business Corporation Act of 1983 …