Voiding Oregon Non-Competition Agreements

Oregon law provides that a non-competition agreement will be voidable if it does not comply with the statutory requirements for such agreements in ORS 643.295. In 2015, the Oregon Court of Appeals addressed, for the first time, what an employee must do to void a non-competition agreement.  Bernard v. S.B., Inc., 270 Ore. App. 710, 350 P.3d 460, review denied, 358 Ore. 69, 363 P.3d 500 (2015). In Bernard, the Court of Appeals held that the employee had not taken steps to void the agreement, and thus it remained valid.

On March 30, 2017, the Oregon District Court provided additional guidance on this issue. In Brinton Business Ventures, Inc. v. Searle, the departing employee, Mr. Searle, argued that his non-competition agreement was void because he did not receive two-week’s advance notice of the restriction in a written offer of employment.  However, Mr. Searle did not take any affirmative steps to void his non-competition agreement until five months after he resigned his employment (to start a competing business), when he received a demand letter from his former employer.  The District Court found, based on Bernard, that ORS 653.295 requires an employee to void a non-competition agreement prior their former employer’s efforts to enforce the agreement.  Accordingly, the District Court concluded that Mr. Searle did not void the agreement. Brinton Bus. Ventures, Inc. v. Searle, No. 3:16-cv-02279-HZ, 2017 U.S. Dist. LEXIS 47732, at *11 (D. Or. Mar. 30, 2017)

The take-away from these cases is: (i) if you are an employee with a non-compete that is voidable because your employer did not comply with ORS 653.295, you need to affirmatively notify your employer that the agreement is void on or about the time you resign or are terminated; or (ii) if you are an employer who happens to have a voidable agreement with an employee, you may be able to escape a challenge to enforcement if your departing employee does not take steps to timely void the agreement.

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