Navigating Non-Compete Agreements in 2025

Navigating Non-Compete Agreements in 2025: A Guide for Small Businesses

Non-compete agreements have long been a tool for businesses to protect their interests, but in 2025, the legal landscape is shifting. With evolving state laws and increased scrutiny from federal regulators, small business owners must tread carefully when drafting or signing these agreements. This blog explores the latest trends, key considerations, and practical steps to ensure your non-compete clauses are both enforceable and fair, with specific insights for businesses in Oregon and Washington.

The Changing Legal Landscape

In recent years, non-compete agreements have faced significant pushback. States like California, Colorado, and Illinois have tightened restrictions, limiting the scope and duration of these clauses to protect employee mobility. For example, California’s Business and Professions Code Section 16600 generally prohibits non-competes, except in specific cases like business sales. Meanwhile, the Federal Trade Commission (FTC) has been exploring a potential nationwide ban, with a proposed rule in 2023 that could reshape employer-employee dynamics. While the rule’s fate remains uncertain in 2025, it signals a broader trend toward employee-friendly policies.

For small businesses, this means non-competes must be carefully crafted to comply with local laws while still safeguarding trade secrets, client relationships, and proprietary information. Overly broad or restrictive agreements risk being struck down in court, leaving your business vulnerable.

Key Considerations for Non-Compete Agreements

To create an enforceable non-compete, small business owners should focus on the following:

1. Reasonable Scope and Duration: Courts typically uphold non-competes that are      narrowly tailored. For instance, a one-year restriction within a 50-mile radius is more likely to be enforced than a five-year, nationwide ban. Tailor the agreement to the employee’s role and the business’s legitimate needs.
2. Protecting Legitimate Interests: Non-competes should safeguard specific business      assets, such as confidential information or customer relationships, rather than simply preventing competition. Clearly define what constitutes a “trade secret” or “proprietary information” in the agreement.
3. State-Specific Compliance: Laws vary widely. In Oregon, non-competes are governed by ORS 653.295, which requires agreements to be limited to 18 months, signed at the start of employment or upon a bona fide advancement, and only apply to employees earning above a certain income threshold (adjusted annually for inflation). The employer must also provide a signed copy of the agreement within 30 days. In Washington, RCW 49.62 restricts non-competes for employees earning less than approximately $120,000 annually (adjusted for 2025), requires advance notice, and limits duration to what is reasonably necessary. Research your state’s requirements or consult a business attorney to ensure compliance.
4. Consideration for Employees: Some states require “adequate consideration” (e.g., a      signing bonus or promotion) for a non-compete to be valid, especially if signed after employment begins. Offering fair benefits can also improve employee buy-in and reduce disputes.
5. Alternatives to Non-Competes: If a non-compete seems too restrictive, consider      non-solicitation or confidentiality agreements. These can protect your business without limiting an employee’s ability to work elsewhere.

Practical Steps for Small Businesses

Here’s how to approach non-compete agreements effectively in 2025:

• Work with a Business Attorney: Legal counsel can help draft agreements that      align with Oregon and Washington laws and judicial trends. They can also advise on whether a non-compete is necessary for your specific situation.
• Conduct a Risk Assessment: Evaluate which roles truly require non-competes.      High-level employees with access to sensitive data or key client relationships may justify restrictions, but blanket policies for all staff are rarely enforceable.
• Communicate Clearly: Be transparent with employees about the agreement’s terms      before they sign. Explain how it protects the business without unduly restricting their future opportunities.
• Review Existing Agreements: If your business uses older non-compete clauses,      revisit them. Laws in Oregon and Washington may have changed, rendering them unenforceable or overly vague.
• Stay Informed on Federal Developments: Monitor updates on the FTC’s      proposed non-compete rule or other federal regulations. Even if a nationwide ban doesn’t materialize, increased scrutiny could influence state courts.

Balancing Business Protection and Employee Rights

Non-compete agreements remain a valuable tool for small businesses in Oregon and Washington, but they require a delicate balance. Overly aggressive clauses can alienate employees, harm your reputation, or lead to costly legal battles. By crafting reasonable, legally sound agreements, you can protect your business while respecting employees’ rights to pursue their careers.

If you’re unsure where to start, our law firm specializes in helping small businesses in Oregon and Washington navigate these complexities. Contact us today to review your non-compete agreements or develop new ones tailored to your needs. Stay ahead of the curve in 2025—because protecting your business shouldn’t mean limiting opportunity.

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