Introduction
Under Oregon law, a noncompetition agreement (“NCA”) is generally defined as a written agreement between an employee and employer in which the employee agrees not to compete with the employer within a certain geographic area and time frame upon termination of employment. NCAs have long been a staple in the business world, designed to preserve and maintain client relationships, market share, and competitive advantage. While they can be a useful tool for businesses, NCAs raise concerns about employee mobility, earning potential, and barriers to innovation.
The landscape surrounding NCAs underwent various changes in the past several years. At the federal level, regulation vacillated from a new Federal Trade Commission (“FTC”) rule effectively banning most NCAs to essentially returning to the status quo with federal regulators only narrowly focusing on particular instances of unlawful anticompetitive acts. On the state level, Oregon’s approach to NCAs has evolved significantly over the years, reflecting a clear trend toward requiring these agreements to be narrowly tailored to remain enforceable. Understanding the dynamics of NCAs, both from a federal and a state-specific perspective, is crucial for businesses and employees alike.
The Federal Landscape of NCAs
NCAs have historically been governed by state law, with federal involvement being limited to enforcing laws concerning competition and unfair practices. Federal interest in NCAs is largely driven by concerns that these agreements are being used excessively and unfairly, specifically in industries where the balance of power between employer and employee is tilted in favor of the employer. NCAs are often used in ways that restrict the careers of employees well beyond what is necessary to protect a company’s legitimate interests. This is particularly problematic for low-wage workers, who may find themselves unable to pursue other employment opportunities simply because they signed an NCA.
On April 23, 2024, the FTC issued a landmark rule banning nearly all NCAs, citing their negative impact on competition, employee mobility, and wage growth. The rule prohibited employers from entering into NCAs with employees, except in limited cases such as the sale of a business. By eliminating these agreements, the FTC sought to foster a more competitive labor market and provide workers with greater freedom to advance their careers. However, in August 2024, the U.S. District Court for the Northern District of Texas granted a nationwide injunction against the rule, holding that the FTC lacks authority to create substantive rules regarding unfair methods of competition. The FTC appealed the district court’s ruling to the Fifth Circuit Court of Appeals and filed a separate appeal in the Eleventh Circuit concerning a similar Florida case challenging the FTC rule. Ultimately, in September 2025, the FTC withdrew its appeals in both appellate courts. It appears the FTC has now resumed its position prior to the challenged rule and has shown an inclination to pursue targeted enforcement when the commission determines that NCAs are overbroad, unfair, and/or anticompetitive in contravention of existing federal law.
Oregon's Approach to NCAs
The approaches that various states take when it comes to enforcing NCAs can be grouped into three general categories: (1) states with no wage threshold or notice requirement; (2) states that impose wage thresholds and notice requirements; and (3) states where NCAs are almost entirely prohibited. Oregon has carved out its own unique path when it comes to regulating NCAs but ultimately falls within the second category. In 2007, Oregon’s legislature enacted Senate Bill 248, making it the first state to statutorily require employers to provide advance notice that an NCA is required as a condition of employment. More recently, in 2021 Oregon’s legislature enacted Senate Bill 169, which introduced significant changes to the state’s noncompetition laws, including a reduction of the enforceable duration from 18 months to 12 months, an increased minimum salary requirement of $100,533, and the automatic voiding of noncompliant NCAs. As of January 2025, Oregon’s enforceable minimum salary threshold jumped up to $116,427 (annual gross salary, plus commissions). Furthermore, on June 9, 2025, Senate Bill 951 became effective, which further limits the use of NCAs by making them void and unenforceable for most licensed healthcare providers. Through these recent enactments, Oregon’s approach emphasizes fairness, transparency, and the protection of employee rights, making Oregon one of the more employee-friendly states.
Key Statutory Provisions for NCAs in Oregon
ORS 653.295 outlines specific guidelines for the enforceability of NCAs. These guidelines are designed to strike a balance between protecting employers’ legitimate business interests and ensuring that employees are not unduly restricted from pursuing new opportunities in their chosen field. The statute provides that NCAs are only enforceable if they meet certain criteria, as outlined below:
- Consideration and Advance Notice: NCAs in Oregon must be supported by adequate consideration. For employees who are already employed when asked to sign an NCA, the employer must provide a promotion, raise, or other benefit to make the agreement enforceable. Additionally, an NCA is void unless the employer informs the employee in a written employment offer that an NCA is required as a condition of employment at least two weeks before the commencement of the employee’s employment. ORS 653.295(1)(a).
- Eligible Employees: NCAs are only enforceable if the contracting employee is an individual engaged in administrative, executive, or professional work who: (1) performs predominantly intellectually, managerial, or creative tasks; (2) exercises discretion and independent judgment; and (3) earns a salary and is paid on a salary basis. ORS 653.295(1)(b); ORS 653.020(3).
- Protectable Interest: The contracting employer must have a protectable interest. An employer has a protectable interest when the employee has access to trade secrets, has access to competitively sensitive confidential business or professional information that otherwise would not qualify as a trade secret (i.e., marketing strategy or sales plans), or is employed as an on-air talent by an employer in the business of broadcasting. ORS 653.295(1)(c); ORS 653.295(2)(a)-(c).
- Copy Provided Upon Termination: NCAs are unenforceable unless the employer provides a signed, written copy of the terms to the employee within 30 days after the date of the termination of the employee’s employment. ORS 653.295(1)(d).
- Earned Salary Threshold: NCAs are enforceable only for employees who earn more than $116,427 per year (adjusted annually for inflation). This threshold reflects Oregon’s focus on ensuring that lower-wage workers are not unfairly restricted. ORS 653.295(1)(e).
- Time Limit: NCAs must be limited to a maximum duration of 12 months from the date of the employee’s termination. The remainder of a term that exceeds this time frame is considered unenforceable. ORS 653.295(3).
- Geographic Scope: While Oregon law does not explicitly require NCAs to define a geographic area, courts generally evaluate the reasonableness of an agreement’s scope in terms of the employer’s legitimate business interests. To increase the likelihood of enforceability, employers should tailor the geographic restrictions to the areas where the employer operates or has significant market influence. Broad or undefined geographic areas may be deemed unreasonable and unenforceable under general contract principles.
A Notable Exception
In Oregon, there are specific exceptions to the general limitations on noncompetition agreements. The most notable exception applies to the sale of a business. When a business owner sells all or part of their business, they may be required to sign an NCA as part of the transaction. These agreements are designed to protect the value of the business being sold by preventing the seller from starting a competing business that could undermine the buyer's investment. However, even in these cases, NCAs must comply with legal requirements for reasonableness, including limits on duration and geographic scope.
Current Trends and Future Outlook
The landscape of NCAs is shifting rapidly, influenced by changing legal standards and economic priorities. Recent trends highlight a concerted effort by legislatures to regulate the use of NCAs. Likewise, courts are also applying more scrutiny toward NCAs, striking down overly broad agreements and emphasizing the importance of tailoring these provisions to reasonable geographic, temporal, and other limitations.
Employers should always consider other mechanisms to protect their business interests, including the use of non-disclosure agreements and non-solicitation clauses to protect trade secrets and client relationships without unduly restricting worker mobility. The overarching trend signals a move toward a legal framework that balances safeguarding legitimate business interests with ensuring employee freedom and economic mobility.
This blog post provides a high-level overview of noncompetition agreements and should not be relied upon as a comprehensive analysis of the legal requirements under federal and state law. If you are an employer seeking to implement or revise an NCA, or an employee evaluating your rights and obligations under such an agreement, we encourage you to contact our office for a consultation.