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
 
                           B-Engrossed
 
                         Senate Bill 248
                   Ordered by the House June 7
  Including Senate Amendments dated May 9 and House Amendments
                              dated
                             June 7
 
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
voidable and unenforceable except under certain conditions. Makes
noncompetition agreement between employer and employee voidable
and unenforceable except under certain conditions. { +  Provides
that term of noncompetition agreement may not exceed two years.
Establishes compensatory provisions under which employer may
enforce noncompetition agreement for full term of agreement.
Specifies that nonsolicitation agreements are not subject to
restrictions imposed on noncompetition agreements. + }
 
                        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 voidable and may not be enforced by a court
unless:
  (a) The employer informs the employee in a written employment
offer received by the employee at least two weeks before the
first day of the employee's employment 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 - }   { + voidable + } 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)(A) The employer informs the employee in a written
employment offer received by the employee at least two weeks
before the first day of the employee's employment that a
noncompetition agreement is required as a condition of
employment; or
  (B) The noncompetition agreement is entered into upon a
subsequent bona fide advancement of the employee by the employer;
  (b) The employee is a person described in ORS 653.020 (3);
  (c) The employer has a protectable interest. As used in this
paragraph, an employer has a protectable interest when the
employee:
  (A) Has access to trade secrets, as that term is defined in ORS
646.461;
  (B) Has access to competitively sensitive confidential business
or professional information that otherwise would not qualify as a
trade secret, including product development plans, product launch
plans, marketing strategy or sales plans; or
  (C) Is employed as an on-air talent by an employer in the
business of broadcasting and, in the year preceding the
termination of the employee's employment, the employer expended
resources equal to or exceeding 10 percent of the employee's
annual salary to develop, improve, train or publicly promote the
employee. For the purposes of this subparagraph, the resources
expended by the employer to publicly promote the employee must
have been expended on media that the employer does not own or
control; and
  (d) The total amount of the employee's annual gross salary and
commissions, calculated on an annual basis, at the time of the
employee's termination exceeds the median family income for a
four-person family, as determined by the United States Census
Bureau for the most recent year available at the time of the
employee's termination. This paragraph does not apply to an
employee described in paragraph (c)(C) of this subsection.
  (2) The term of a noncompetition agreement may not exceed two
years. The remainder of a term of a noncompetition agreement in
excess of two years is voidable and may not be enforced by a
court of this state. + }
    { - (2) - }   { + (3) + }   { - Subsection (1) of this
section applies - }  { + Subsections (1) and (2) of this section
apply + } 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) 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 - }
 { + Subsections (1) and (2) of this section do + } not apply
to { + :
  (a) + } Bonus restriction agreements, which are lawful
agreements that may be enforced by the courts in this state { + ;
or
  (b) A covenant not to solicit employees of the employer or
solicit or transact business with customers of the employer + }.
  (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) Notwithstanding subsection (1)(b) and (d) of this
section, a noncompetition agreement is enforceable for the full
term of the agreement, for up to two years, if the employer
provides the employee, for the time the employee is restricted
from working, the greater of:
  (a) Compensation equal to at least 50 percent of the employee's
annual gross base salary and commissions at the time of the
employee's termination; or
  (b) Fifty percent of the median family income for a four-person
family, as determined by the United States Census Bureau for the
most recent year available at the time of the employee's
termination. + }
    { - (6) - }   { + (7) + } 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) 'Broadcasting' means the activity of transmitting of
any one-way electronic signal by radio waves, microwaves, wires,
coaxial cables, wave guides or other conduits of
communications. + }
    { - (b) - }   { + (c) + } 'Employee' and 'employer' have the
meanings given those terms in ORS 652.310.
    { - (c) - }   { + (d) + } '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 to arbitration agreements entered into on or
after the effective date of this 2007 Act. + }
  SECTION 5.  { + Any noncompetition agreement entered into
before the effective date of this 2007 Act shall continue to be
governed by ORS 653.295 as in effect immediately before the
effective date of this 2007 Act. + }
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