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Non-competition and non-solicitation agreements can be important tools for companies looking to protect their customers 鈥� and their workforce 鈥� in the event of a key employee鈥檚 departure. However, unless they are crafted carefully and in compliance with strict statutory requirements, their protections can disappear just when a company needs them most. Below are the five most common mistakes seen in non-competition and non-solicitation agreements, any one of which could make an agreement completely unenforceable.

Mistake no. 1: restrictions that last too long

This mistake is very common, but also avoidable. In 2016, Oregon law changed and reduced the maximum time a non-competition restriction could last to 18 months. Agreements entered into after Jan. 1, 2016 are voidable if the restriction period lasts any longer. Non-competition agreements that were put in place before that date, however, may last up to 24 months. Creative drafting can be used for the length of the restriction, such as making it last as long as the employee鈥檚 employment up to 18 months. Also, there is no need to seek the maximum duration if one is satisfied with the protection a shorter term will provide.

Mistake no. 2: restrictions that are too broad

Non-competition clauses can restrict people from competing with a former employer by providing similar products, processes or services. In order for a non-competition agreement to be enforceable, it鈥檚 important that it describe the employer鈥檚 products, processes or services with some particularity. Otherwise, a court could rule that the restriction unfairly limits a former employee鈥檚 ability to earn a living and declare the restriction void.

When describing the areas of non-competition, specificity will strengthen the agreement. Using 鈥渞esidential construction鈥� instead of simply 鈥渃onstruction,鈥� for example, is more likely to result in a contract that the company can enforce confidently. Feel free to add types of construction work your company already provides or plans to expand into, just make ensure justification for each type of work included.

Non-solicitation provisions should also be constructed carefully. In Oregon, courts have found that overly broad non-solicitation provisions are essentially secret non-competition restrictions, which must meet a higher standard to be enforced. Non-solicitation agreements, when crafted properly, can provide employers with robust protection: a former employee can be prohibited from soliciting customers or luring away valuable employees. A non-solicitation provision prohibiting the former employee from soliciting current customers, or current employees, of the company is very likely enforceable.

Where non-solicitation agreements tend to be viewed as overly broad is when they stray into prohibitions like 鈥渇irst- or secondhand direct or indirect solicitation of any current and prospective or potential customer or any current or former employee.鈥� Narrower restrictions that still protect one鈥檚 interests are more likely to survive judicial scrutiny.

Mistake no. 3: unlimited geographic scope

Some non-competition and non-solicitation agreements are either very expansive as to where the restrictions apply, or else are silent about any geographical limitation. An advisable path forward is to include a geographic scope that is tailored to the areas one鈥檚 company serves. If a company operates exclusively in Central Oregon, then a former employee who moves to the Midwest is unlikely to be in competition with it. The important point here is to make sure that if a judge questions why a specific geographic area was included; it can be justified by the company鈥檚 operations or reasonable plans for expansion. The restriction can be described in a way that suits the company, including by state, by certain counties, or by miles from the cities where the company operates.

Mistake no. 4: agreements made at the start of employment

A new employee鈥檚 first day may seem like a natural time to complete necessary paperwork, including signing a non-competition agreement. For other employees, it may seem natural to get a non-competition agreement in place once the employee has demonstrated the potential for long-term service. In both of these circumstances, the non-competition agreement will not be valid. Oregon law demands that in order to be enforceable, an employer must tell the employee, in a written employment offer, that a non-competition agreement will be required as a condition of employment. What鈥檚 more, the written notification must be received by the employee a full two weeks before the first day of employment.

There is an exception, however, for employees who receive a significant promotion. When an employee鈥檚 bona fide advancement occurs, an employer can condition the promotion upon the signing of a non-competition agreement. Beyond those two circumstances, a non-competition agreement will not be valid even if an employee willingly enters into it. While the same restrictions do not apply to non-solicitation agreements, non-solicitation provisions included in an invalid non-competition agreement may be eliminated if the entire contract is condemned.

Mistake no. 5: use of a one-size-fits-all approach

In order to offer the best protection, non-competition and non-solicitation agreements must be tailored to an individual business and even to individual employees. Given the fact-specific nature of the restrictions that will fit inside the confines of the law, and the huge variance in the protectable interests and geographic reach for different companies, these agreements are much more likely to be struck down if they are not custom-built.

Damien Munsinger is an attorney at Barran Liebman. He represents and advises private and public employers regarding a wide variety of employment law issues, including discrimination and wrongful termination claims. Contact him at 503-276-2112 or [email protected].