74th OREGON LEGISLATIVE ASSEMBLY--2007 Regular Session
NOTE: Matter within { + braces and plus signs + } in an
amended section is new. Matter within { - braces and minus
signs - } is existing law to be omitted. New sections are within
{ + braces and plus signs + } .
LC 267
A-Engrossed
Senate Bill 248
Ordered by the Senate May 9
Including Senate Amendments dated May 9
Printed pursuant to Senate Interim Rule 213.28 by order of the
President of the Senate in conformance with presession filing
rules, indicating neither advocacy nor opposition on the part
of the President (at the request of Senate Interim Committee on
Judiciary)
SUMMARY
The following summary is not prepared by the sponsors of the
measure and is not a part of the body thereof subject to
consideration by the Legislative Assembly. It is an editor's
brief statement of the essential features of the measure.
Makes arbitration agreement between employer and employee void
and unenforceable under certain conditions. Makes noncompetition
agreement between employer and employee void and unenforceable
under certain conditions. { + Establishes conditions under which
noncompetition agreement between employer and employee is valid
and enforceable. + }
A BILL FOR AN ACT
Relating to employment agreements; creating new provisions; and
amending ORS 36.620 and 653.295.
Be It Enacted by the People of the State of Oregon:
SECTION 1. ORS 36.620 is amended to read:
36.620. (1) An agreement contained in a record to submit to
arbitration any existing or subsequent controversy arising
between the parties to the agreement is valid, enforceable and
irrevocable except upon a ground that exists at law or in equity
for the revocation of a contract.
(2) Subject to ORS 36.625 (8), the court shall decide whether
an agreement to arbitrate exists or a controversy is subject to
an agreement to arbitrate.
(3) An arbitrator shall decide whether a condition precedent to
arbitrability has been fulfilled.
(4) If a party to a judicial proceeding challenges the
existence of, or claims that a controversy is not subject to, an
agreement to arbitrate, the arbitration proceeding may continue
pending final resolution of the issue by the court, unless the
court otherwise orders.
{ + (5) A written arbitration agreement entered into between
an employer and employee and otherwise valid under subsection (1)
of this section is void and may not be enforced by the court
unless:
(a) The employer informs the employee at the time the offer of
employment is first communicated to the employee that an
arbitration agreement is required as a condition of employment;
or
(b) The arbitration agreement is entered into upon a subsequent
bona fide advancement of the employee by the employer. + }
SECTION 2. ORS 653.295 is amended to read:
653.295. (1) A noncompetition agreement entered into between an
employer and employee is void and may not be enforced by
{ - any court in - } { + a court of + } this state unless
{ - the agreement is entered into upon - } the:
{ - (a) Initial employment of the employee with the employer;
or - }
{ - (b) Subsequent bona fide advancement of the employee with
the employer. - }
{ + (a) Employer informs the employee prior to the acceptance
of the employment offer by the employee that a noncompetition
agreement is required as a condition of employment; or
(b) Noncompetition agreement is entered into upon a subsequent
bona fide advancement of the employee by the employer. + }
(2) Subsection (1) of this section applies only to
noncompetition agreements made in the context of an employment
relationship or contract and not otherwise.
(3)(a) Subsection (1)(a) of this section applies only to
noncompetition agreements entered into after July 22, 1977.
(b) { - Subsection (1)(b), subsections (4) and (5) and
subsection (6)(a) - } { + Subsections (1)(b), (4), (5) and
(7) + } of this section apply to employment relationships and
bonus restriction agreements in effect or entered into after
October 15, 1983.
(4) Subsection (1) of this section does not apply to bonus
restriction agreements, which are lawful agreements that may be
enforced by the courts in this state.
(5) Nothing in this section restricts the right of any person
to protect trade secrets or other proprietary information by
injunction or any other lawful means under other applicable laws.
{ + (6) A noncompetition agreement entered into between an
employer and employee under subsection (1) of this section is
void and may not be enforced by a court of this state if the
employee is laid off by the employer for any reason other than
just cause. This subsection does not apply to a covenant not to
solicit or transact business with the customers of the employer.
(7) If an employee subject to a noncompetition agreement is
laid off due to an economic downturn affecting the employer, and
the employee is not rehired by the employer within 90 days of the
date of being laid off in a position of the same level as the
position from which the employee was laid off, the noncompetition
agreement is void.
(8) Notwithstanding subsections (1)(b), (4), (5), (6) and (7)
of this section, a noncompetition agreement is enforceable for
the full term of the agreement if the employer provides the
employee full compensation at the level at which the employee was
being compensated as of the date of being laid off for the full
term of the agreement.
(9) Notwithstanding subsections (1), (6), (7) and (8) of this
section, a noncompetition agreement between an employer and the
chief executive officer, chief financial officer or members of
the board of directors of the company is valid and may be
enforced in a court in this state. + }
{ - (6) - } { + (10) + } As used in this section:
(a) 'Bonus restriction agreement' means an agreement, written
or oral, express or implied, between an employer and employee
under which:
(A) Competition by the employee with the employer is limited or
restrained after termination of employment, but the restraint is
limited to a period of time, a geographic area and specified
activities, all of which are reasonable in relation to the
services described in subparagraph (B) of this paragraph;
(B) The services performed by the employee pursuant to the
agreement include substantial involvement in management of the
employer's business, personal contact with customers, knowledge
of customer requirements related to the employer's business or
knowledge of trade secrets or other proprietary information of
the employer; and
(C) The penalty imposed on the employee for competition against
the employer is limited to forfeiture of profit sharing or other
bonus compensation that has not yet been paid to the employee.
(b) 'Employee' and 'employer' have the meanings given those
terms in ORS 652.310.
{ + (c) 'Just cause' means a cause reasonably related to the
ability of the employee to perform required work and includes,
but is not limited to, any willful violation of reasonable
workplace rules, regulations or written policies.
(d) 'Laid off' means to permanently terminate an employment
relationship for reasons that are beyond the employee's control
and that do not reflect discredit upon the employee. Reasons for
a layoff include, but are not limited to, the elimination of the
employee's position, a lack of available funding or work, a
reduction in the size of the workforce and changes in the
workplace that affect staffing needs. + }
{ - (c) - } { + (e) + } 'Noncompetition agreement' means an
agreement, written or oral, express or implied, between an
employer and employee under which the employee agrees that the
employee, either alone or as an employee of another person, will
not compete with the employer in providing products, processes or
services that are similar to the employer's products, processes
or services for a period of time or within a specified geographic
area after termination of employment.
SECTION 3. { + The amendments to ORS 653.295 by section 2 of
this 2007 Act apply to noncompetition agreements entered into on
or after the effective date of this 2007 Act. + }
SECTION 4. { + The amendments to ORS 36.620 by section 1 of
this 2007 Act apply only to arbitration agreements entered into
on or after the effective date of this 2007 Act. + }
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