Oregon Court of Appeals Affirms Grant of Summary Judgment to Employer in Case Argued by Gleaves Swearingen LLP’s own Laura T.Z. Montgomery

May 12, 2015

In Bernard v. S.B., Inc., Ms. Bernard brought a claim against her former employer for “intentional interference with economic relations,” based on the employer’s threats to enforce a noncompetition agreement Ms. Bernard argued was unenforceable.  When Ms. Bernard had started working for her former employer, the employer had her sign a noncompetition agreement.  Under an Oregon statute, ORS 653.295, noncompetition agreements are subject to certain requirements.  If the noncompetition agreement does not comply with all the requirements, the agreement is deemed “voidable and may not be enforced by a court.”

One such requirement is that the employer notify a potential employee of the existence of a noncompetition agreement two weeks before actually hiring the employee.  Ms. Bernard argued that her former employer had failed to adhere to this notice requirement; thus, the noncompetition agreement was deemed “voidable” under the terms of the Oregon statute.

After working for a few years for the former employer, Ms. Bernard quit her employment and went to work for one of the former employer’s competitors.  Hearing this news, and not knowing that the noncompetition agreement potentially may not comply with the Oregon statute, the former employer notified Ms. Bernard and her new employer that Ms. Bernard was subject to the terms of the noncompetition agreement.

Ms. Bernard argued that, because the noncompetition agreement did not comport with the statute when it was entered into, the employer’s threats to enforce that agreement constituted intentional interference with Ms. Bernard’s economic relations.  Interpreting the meaning of the word “voidable” in the context of the statute and its legislative history, the Court disagreed.  The Court noted that, in contrast to the word “void,” i.e., of no effect, the word “voidable” means “a valid act that may be voided.”  Therefore, the Court held that a noncompetition agreement that does not comport with all of the statutory requirements remains valid and enforceable until an employee takes affirmative steps to “avoid” its obligations.  Because, at the time the employer invoked the noncompetition agreement, Ms. Bernard had taken no steps to avoid the agreement, the Court determined that the employer had not acted with an “improper purpose” in invoking the agreement.  Thus, the employer was not liable for intentional interference with economic relations.

After the Court’s ruling in Bernard, an Oregon employer does not act with an “improper purpose” by invoking rights under a non-competition agreement when the employee has failed to take any steps to avoid that agreement, even where the non-competition agreement in fact does not comply with the Oregon statute.

The firm’s Laura T.Z. Montgomery successfully argued the case for the employer both at trial and on appeal.  Laura is an experienced litigator who has litigated cases in many different areas of law, including employment law, business and commercial litigation, real property law, construction disputes, and trust-and-estates disputes.  Laura can be reached at (541) 686-8833 or at montgomery@gleaveslaw.com.