PORTLAND, ORE. — Oregon law now limits noncompete covenants to two years, requires immediate notification upon hire and forces owners to pay
employees thousands of dollars to enforce such agreements.
The bill, signed Aug. 6 by Gov. Ted Kulongoski, has the profession's leaders scrambling to ascertain how the restrictions,
specifically payout language, might affect veterinarians. The law covers hourly workers in non-managerial posts and salaried
employees earning up to $61,000 a year. To enforce a noncompete agreement, owners who lose an associate grossing less might
have to pay that person half of his or her annual income. What stands to protect the state's 500 practice owners is an exemption
for workers with access to "trade secrets".
If client lists fall in that category, veterinary medicine is in the clear. But at press time, the Oregon Veterinary Medical
Association (OVMA) remained uncertain whether that loophole applies to the profession. Even if the stipulation can't be enforced
in veterinary medicine, Senate Bill 248 provides a blueprint for copycat laws in other states. California, Montana, North
Dakota, Oklahoma and Alabama already shun such legal arrangements. Oregon's mandate signals changes to come, adding to the
nationwide erosion of state laws concerning noncompete covenants, experts say.
Dr. Jim Wilson
"To my knowledge, Oregon is the only state that has a payout stipulation," says Jim Wilson, DVM, JD, owner of Priority Veterinary
Management Consultants in Yardley, Pa. "It does appear that contracts with veterinarian are excluded under the professional
exemption code, but the language in this bill is very confusing. Nevertheless, what it stipulates is truly fascinating."
The bill's novel parameters are what make it so interesting, Wilson contends. Apart from the payout clause, the law requires
owners to offer job candidates written notification of any noncompete requirements at least two weeks before the employee's
"In Oregon you have to be up front," Wilson says. "I'm absolutely in favor of that."
There's also concern regarding when the law takes effect, considering no date is specified in the language. While reports
speculate its will be implemented Jan. 1, even veterinarian Rep. Kurt Schrader, who voted for the measure, remains unclear
concerning whether the law will apply to noncompetes enacted between Aug. 6 and the year's end.
"That's a good question. I don't have an answer for that," he says.
Schrader, owner of Clackamas County Veterinary Clinic in Oregon City, says the bill "took us all by surprise during the middle
of the session."
According to OVMA lobbyist Laura Smith, the initiative stems from Oregon Labor Commissioner Dan Gardner's attempt to eliminate
noncompetes agreements entirely. Gardner accused businesses of abusing the agreements by using them against low-level workers
not exposed to company secrets.
Schrader says the bill, while somewhat controversial, actually cements the authority of noncompete agreements by addressing
them legislatively in a state where such covenants often falter in the courts.
Still, the law's payout clause is concerning, he says. If it applies to veterinarians, Schrader promises to flex his political
muscle to alter the measure. Although Oregon's next full legislative session doesn't begin until 2009, he assures the law
won't go unaddressed.
"As state senator in Oregon, I often find that legislation has unintended consequences," he says. "It's very common that we
would revisit something of this magnitude, and I'm confident that most of what we don't like can eventually be changed."