Oregon Non-Compete Agreement Income Thresholds and Enforceability Rules

Introduction to Oregon's Non-Compete Laws

In Oregon, restrictive covenants are heavily regulated to protect employees' ability to move freely in the job market. Under Or. Rev. Stat. § 653.295, a non-competition agreement is outright void-not just voidable-if it fails to meet strict statutory criteria. The most critical of these criteria is the income threshold, which ensures that low-wage and middle-income workers are not unfairly barred from earning a livelihood in their chosen profession.

Whether you work in Portland, Bend, or Eugene, understanding how your salary, bonuses, and commissions factor into this threshold is essential. If you are facing an unfair non-compete, hiring an experienced local lawyer from our directory can help you invalidate the contract and move forward with your career.

Step-by-Step Process to Determine Enforceability in Oregon

Navigating the enforceability of a non-compete requires a precise evaluation of your compensation and the agreement's terms. Here is how courts and the Oregon Bureau of Labor and Industries, Portland analyze these contracts.

Step 1: Evaluating Exemptions for Low-Wage Workers

Oregon law strictly protects workers earning below a certain amount. To be bound by a non-compete, you must qualify as an exempt administrative, executive, or professional employee under state wage laws. More importantly, your total annual gross salary and commissions at the time of termination must exceed the inflation-adjusted threshold set by the state (which currently stands at $119,541 based on Consumer Price Index adjustments). If you earn less than this, the agreement is automatically void.

Step 2: Calculating Bonuses and Commissions into the Threshold

The statutory threshold looks at your total compensation at the time of termination. This includes your base salary and earned commissions, but it does not generally include discretionary bonuses or anticipated future earnings. The calculation must reflect your annualized income based on what was actually earned and paid out. If your variable compensation fluctuates and drops your total earnings below the threshold in your final year, the employer loses the right to enforce the non-compete.

Here is a breakdown of what counts towards the threshold:

Step 3: Assessing Garden Leave Requirements

If an employee does not meet the minimum income threshold, an Oregon employer still has one potential workaround: the garden leave provision. Under Or. Rev. Stat. § 653.295, an employer can keep a non-compete in force by agreeing in writing to pay garden leave compensation during the restriction period equal to the greater of at least 50% of the employee's annual gross base salary and commissions at termination, or 50% of the statutory threshold ($100,533 adjusted annually for inflation). The restriction period cannot exceed 12 months. If the employer fails to make these payments, the non-compete is unenforceable. This principle was famously tested in cases like Nike, Inc. v. McCarthy, 379 F.3d 576 (9th Cir. 2004), where compensation during the restricted period was a central issue.

Step 4: Steps to Invalidate a Void Agreement

Historically, Oregon non-competes that failed to meet statutory requirements were considered voidable, meaning the employee had to take affirmative legal action to invalidate them. Following the 2022 amendments, non-compliant agreements are entirely void ab initio (from the beginning). This means you do not have to file a formal lawsuit to void the agreement. However, employers may still send cease-and-desist letters. A local attorney can help you respond with a formal letter declaring the contract void under Oregon law, preventing costly litigation at the Multnomah County Circuit Court, Portland or the Washington County Circuit Court, Hillsboro.

How Much Does it Cost in Oregon?

Disputing a non-compete in Oregon can vary in cost depending on whether the matter escalates to litigation:

• Attorney Review: Most employment lawyers charge between $250 and $500 for a comprehensive review of a non-compete agreement and drafting a demand letter.
• Court Filing Fees: If you or your employer files a lawsuit seeking a declaratory judgment or an injunction in an Oregon Circuit Court, the standard civil filing fee is typically $281.
• Litigation Costs: Defending an injunction can cost anywhere from $5,000 to $20,000+ in attorney fees, especially if the employer claims you misappropriated trade secrets defined under Or. Rev. Stat. § 646.461. However, successful employees may sometimes recover attorney fees under specific contract terms.

How Long Does the Process Take?

By statute, an Oregon non-compete cannot last longer than 12 months from the date of termination. If a dispute arises, an employer might seek a temporary restraining order (TRO) within days of your departure. A full hearing on a preliminary injunction typically occurs within 2 to 4 weeks. If the case proceeds to a full trial at the Lane County Circuit Court, Eugene, it can take 6 to 12 months, although most disputes are settled within the first few weeks once the threshold criteria are clearly evaluated.

Frequently Asked Questions (FAQ)