QUESTIONS
1. I have been employed by the same company for ten years now. Recently, the company has asked all employees to sign a "non-solicitation" agreement prohibiting former employees from soliciting the business of any entity which was a customer of the company at any time over the past five years or was a target of the company’s marketing for five years after termination of employment. Is this type of provision enforceable?
2. I’m over age 50 and haven’t been able to save as much for retirement as I would have liked to. Is there a way to make "catch-up" contributions to my company’s 401(k) plan?
ANSWERS
1. I have been employed by the same company for ten years now. Recently, the company has asked all employees to sign a "non-solicitation" agreement prohibiting former employees from soliciting the business of any entity which was a customer of the company at any time over the past five years or was a target of the company’s marketing for five years after termination of employment. Is this type of provision enforceable?
No. In Dymock v. Norwest Safety Protective Equipment for Oregon Industry, Inc., 172 Or.App. 399 (2001), rev allowed 332 Or. 326 (2001) an employee of 17 years claimed he was "wrongfully discharged" after being fired for refusing to sign an agreement that included a "non-solicitation" provision that among other things, prohibited him from soliciting the business of any entity which was a customer of the company at any time during his employment or was a target of the company’s marketing for five years after termination of employment. The court found that this provision constituted a "non-competition agreement" under ORS 653.295. This statute precludes enforcement of non-competition agreements not entered into upon initial employment or subsequent bona fide advancement of the employee. The appellate court interpreted the word "compete" broadly and indicated that the non-solicitation provisions in the agreement materially deterred or impaired the employee from subsequently engaging in the same business as the employer.
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2. I’m over age 50 and haven’t been able to save as much for retirement as I would have liked to. Is there a way to make "catch-up" contributions to my company’s 401(k) plan?
Yes. First, under current law, an employee may elect to defer up to $11,000 tax-free for 2002 under a 401(k) plan. This amount continues to rise in $1,000 annual increments until it reaches $15,000 in 2006. However, the applicable dollar limit on elective deferrals under a 401(k) plan is increased after 2001 for individuals who have reached age 50. In other words, you can contribute up the maximum amount permitted under the normal operation of the 401(k) plan, plus additional amounts under the so-called catch-up provisions.
The additional amount of elective contributions that an individual may make is the lesser of (1) the "applicable dollar amount" ($1,000 for 2002, $2,000 for 2003, $3,000 for 2004, $4,000 for 2005 and $5,000 for 2006 and later), or (2) the plan participant’s compensation for the year reduced by any other elective deferrals for the year. Catch-up contributions are not subject to any other contribution limits and are not taken into account in applying other contribution limits. An employer is permitted to make matching contributions regarding catch-up contributions; however, any matching contributions are subject to the regular applicable rules.
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