State tightens up on rules for noncompete agreements

In the latest move in a string of changes aimed at tightening the state’s labor laws, legislators passed a bill in April that cracks down on the use of noncompete agreements.

The law takes effect Jan. 1, 2020, and focuses on noncompete agreements between employers and employees, which prohibit employees from seeking employment with competing companies. The agreements typically remain in effect for a certain amount of time if an employee chooses to leave the company.

The new law makes these agreements unenforceable unless they meet a newly defined set of criteria, including that the employee earns more than $100,000 per year (that salary will be adjusted for inflation in future years) and that the noncompete period does not exceed 18 months.

If the agreement is a condition of employment, the terms of the agreement must be disclosed to prospective employees beforehand. It also requires that laid-off employees continue to be paid during the enforcement period.

It also prohibits noncompete agreements for contractors unless the contractor is paid more than $250,000, and allows courts to assess damages or a $5,000 penalty, whichever is greater, plus attorney fees.

The change comes at a time when noncompete agreements are receiving heightened scrutiny nationwide. A June 27 NPR story discussed how the practice is increasingly spreading beyond its traditional white-collar sector to cover lower-wage blue-collar workers, triggering pushback from courts in several states including New Hampshire, Maryland, Delaware and Rhode Island.

Oregon passed a bill tightening its own laws governing noncompete agreements during the 2019 legislative session, adding a requirement that employers provide employees with a written copy of the terms of an agreement within 30 days of the termination of employment.