Non-competition and non-solicitation agreements can be important tools for companies looking to protect their customers – and their workforce – in the event of a key employee’s 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’s 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’s important that it describe the employer’s products, processes or services with some particularity. Otherwise, a court could rule that the restriction unfairly limits a former employee’s ability to earn a living and declare the restriction void.

When describing the areas of non-competition, specificity will strengthen the agreement. Using “residential construction” instead of simply “construction,” 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 “first- or secondhand direct or indirect solicitation of any current and prospective or potential customer or any current or former employee.” Narrower restrictions that still protect one’s 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’s 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’s 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’s 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’s 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’s 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 dmunsinger@barran.com.

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Oregon’s new minimum wage law, which will affect thousands of jobs (including construction) statewide, will become effective on July 1. The current minimum wage of $9.25 per hour applies to any job site in Oregon, no matter if it’s in Grants Pass, Hillsboro, Imnaha or Burns. Under the new system, increases in the minimum wage will be phased in over several years, and at different rates in different areas of the state.

The new law implements a three-tiered minimum wage system across Oregon. Each tier corresponds to areas with different levels of population density. The three tiers are defined as:

• high density: the area within Portland’s urban growth boundary;
• medium density: the areas of Multnomah, Clackamas and Washington counties that lie outside Portland’s urban growth boundary, as well as Benton, Clatsop, Columbia, Deschutes, Hood River, Jackson, Josephine, Lane, Lincoln, Linn, Marion, Polk, Tillamook, Wasco and Yamhill counties; and
• low density: Baker, Coos, Crook, Curry, Douglas, Gilliam, Grant, Harney, Jefferson, Klamath, Lake, Malheur, Morrow, Sherman, Umatilla, Union, Wallowa and Wheeler counties.

The medium density areas’ minimum wage will establish the base rate. Employers in high density areas will pay a premium over the base rate, while employers in low density areas will receive a discount from the base rate. The minimum wage for each area is set by statute until July 2023.

For 2023 and beyond, Oregon’s labor commissioner will determine the base rate minimum wage, in similar fashion to the current system based on the Consumer Price Index.

Until then, minimum wages in high, medium and low density areas are set by the new law:

• From July 1, 2016 through June 30, 2017, high density will be $9.75, medium density (base rate) will be $9.75 and low density will be $9.50.

• From July 1, 2017 through June 30, 2018, high density will be $11.25, medium density (base rate) will be $10.25 and low density will be $10.

• From July 1, 2018 through June 30, 2019, high density will be $12, medium density will be $10.75 and low density will be $10.50.

• From July 1, 2019 through June 30, 2020, high density will be $12.50, medium density will be $11.25 and low density will be $11.

• From July 1, 2020 through June 30, 2021, high density will be $13.25, medium density will be $12 and low density will be $11.50.

• From July 1, 2021 through June 30, 2022, high density will be $14, medium density will be $12.75 and low density will be $12.

• From July 1, 2022 through June 30, 2023, high density will be $14.75, medium density will be $13.50 and low density will be $12.50.

• From July 1, 2023 onward, high density will be $1.25 greater than the base rate, medium density will be CPI-adjusted and low density will be $1 less than the base rate.

These minimum wages will take effect on July 1 each year – a change from the previous annual effective date of Jan. 1.

Many employers with locations or job sites in multiple counties are wondering which minimum wage will apply to them. The law states that the applicable minimum wage shall be determined by the “employer’s location.” Unfortunately, “employer’s location” is not defined in the law, leaving employers with multiple locations on standby until Oregon’s Bureau of Labor and Industries defines the term. Since the penalties for noncompliance with minimum wage laws are significant, employers should carefully review the rules to ensure they are paying the correct minimum wage.

Oregon’s minimum wage law is the only one of its kind in the nation, and represents a compromise between the goals of boosting wages for workers while simultaneously recognizing the challenges facing businesses and rural economies. The compromise law was passed while two separate ballot measures were moving forward, each of which sought faster hikes to the minimum wage. One would have raised Oregon’s minimum wage to $13.50, another to $15. The groups advocating for a $13.50 minimum wage joined in supporting the bill passed by the Legislature, while the backers of the $15 minimum wage initiative ended their campaign after Gov. Kate Brown signed Oregon’s new minimum wage system into law. Taking action on the minimum wage was Brown’s top legislative priority for 2016.

The new law’s adoption does not mean that employers can count on a steady and predictable minimum wage system through 2023 and beyond. Already, legislative leaders are calling for relief from the new minimum wage system for younger workers and trainees. Other legislators have called for relief for Oregon businesses along the border with Idaho, which has a substantially lower minimum wage. These proposed changes may be strenuously opposed by groups that lobbied hard during the legislative session to avoid industry- and worker-specific carve-outs from the new minimum wage system.

Another potential source of change could be action at the federal level requiring a higher minimum wage than Oregon’s, though that prospect appears unlikely. Finally, several counties are exploring the possibility of mounting a legal challenge to the new law. Employers will need to follow these developments closely to make sure all their jobs and workers remain in compliance.

Damien T. 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 dmunsinger@barran.com.

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Oregon employers are hiring, and the state may be entering an “applicants’ job market.” If your company is planning on adding team members in 2016, here are the updates you need to know:

Ban the box laws are becoming increasingly common – 15 states and more than 100 cities have passed one. Oregon’s ban the box law goes into effect on Jan. 1, 2016. The Oregon law makes it illegal for most employers to ask about criminal history on employment applications, increasing the likelihood that job applicants with criminal records will be interviewed for an open position. The law does not prevent employers from inquiring about criminal history altogether, however. Employers can ask about criminal history at an initial interview, and can condition an offer of employment upon an applicant’s successful passage of a criminal background check. Since the law does not define exactly what constitutes an initial interview, employers unsure would be wise to delay asking about criminal history until they are positive one has occurred. A quick phone screening, for example, may not qualify. Employers should also check their employment applications to make sure they do not ask about criminal history unless federal, state or local law requires a criminal background check for the position.

A new Oregon law also protects social media accounts of job applicants and employees. When it comes to personal social media accounts, the law makes it illegal for an employer to ask for login information like username and password, to require that the applicant or employee “friend” an employer’s account, or to shoulder-surf while the applicant or employee accesses his or her social media accounts. However, the law is limited to purely personal social media accounts, which means it must be unrelated to the employer’s business purpose and not paid for by the employer in order to qualify for protection. So, if one or more of your employees manages your company’s social media accounts, don’t worry – you are still allowed to access and control those accounts. Where gray areas arise, and where employers should tread lightly, is when an employee uses a personal account to post business-related information. Cautious employers will not assume that because an employee posts about the business, the employer can now access everything in that employee’s otherwise personal social media account. Oregon’s social media privacy law goes into effect Jan. 1.

Oregon’s paycheck fairness act also goes into effect Jan. 1. The law is intended to bring more transparency to employee wages, with the aim of reducing the gender pay gap. At least one study has showed that in Oregon, women earn 79 cents for every $1 earned by men. The law protects employees who inquire about wages or disclose information about their wages, and also protects employees who make an unfair wage charge based on disclosed wages. The law provides an exception for employees who have access to the wage information of other employees as part of their job, and who disclose that wage information to employees not authorized to receive it. So, employees with access to wage information are not permitted to broadcast everyone’s pay. However, employees with this kind of access are protected by the law for disclosing wage information in response to a charge or complaint, or as part of an investigation, proceeding, hearing or other legal action.

Paid sick leave will go into effect statewide in 2016. Starting Jan. 1, Oregon employers with 10 or more employees (or six or more employees in Portland) will be required to offer at least 40 hours of paid sick leave per year. Oregon is just one of four states to have passed a paid sick leave law. Fortunately for Oregon employers, the law pre-empts local ordinances (including Portland’s) so there will be just one sick leave standard to apply in 2016. If you have an existing PTO (paid time off) policy that meets all the requirements of the paid sick leave law, then you will already be in compliance when the law takes effect. In many instances, an existing PTO policy can satisfy Oregon’s paid sick leave law after some modifications.

Employers hiring in 2016 also need to ask what type of workers they are adding: employees or independent contractors. The U.S. Department of Labor, responsible for enforcing the Fair Labor Standards Act, recently issued guidance stating that it considers many workers labeled by employers as “independent contractors” to be misclassified “employees.” They should likewise receive all benefits to which employees would be entitled. “While there are a number of factors to consider in worker classification, the most important is whether the workers are economically dependent on the employer, or whether they are truly in business for themselves. Expect the DOL to take a very active role in investigating worker classification in 2016. Misclassification can have serious consequences for employers, including sanctions for back pay, back taxes and other damages.

Finally, employers adding members to their teams need to be aware of new proposed DOL regulations that will impact exempt (salaried) workers who do not receive overtime pay. Previously, workers who performed the duties described in the executive, administrative, professional and other exemptions to the overtime provisions of the Fair Labor Standards Act had to earn at least $23,660 per year to retain the exemption. Under the proposed regulations, the exempt duties remain, but the minimum annual salary would climb to $50,440 per year. That means an exempt employee performing the necessary duties but earning less than the proposed minimum salary would now be eligible for overtime pay. The regulations are not yet finalized, so there is no effective date. But employers should consider allocating hours differently or budgeting for additional overtime pay or salary in 2016.

Damien Munsinger is an attorney at Barran Liebman LLP. He represents employers in employment law matters. Contact him at 503-276-2112 or dmunsinger@barran.com.

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