Can an Oregon law firm make associates or departing partners sign a covenant not to compete or pay a penalty for taking firm clients?

Plain-English summary

Three law partners employ an associate and want to restrict the associate's ability to do legal work for partnership clients if the associate leaves, and also want to bar any of the three partners who leaves from working for partnership clients. The opinion asks whether they may require the associate to sign a non-compete covenant, whether they may put such a restriction in the partnership agreement, and whether the agreement may place any other conditions on a departing partner.

The opinion concludes no to the first two and yes, qualified, to the third. It applies Oregon RPC 5.6(a), which bars a lawyer from offering or making a partnership, employment, or similar agreement that restricts a lawyer's right to practice after the relationship ends (except retirement-benefit agreements). The opinion reads the rule to make lawyer covenants against competition impermissible and to bar requiring a withdrawing lawyer to pay any penalty as a precondition to competing.

On the third question the opinion concludes a partnership agreement may provide for reimbursement to the partnership for harm actually caused by the withdrawal, or for a diminution in value caused by the withdrawal. Quoting Hagen v. O'Connell, Goyak & Ball, it explains that, although a penalty provision cannot be enforced, a firm may adjust the value of a withdrawing shareholder's interest by a formula that bears a reasonable relationship to the probable loss to the firm. The opinion notes that in 2026 the Oregon Supreme Court amended RPC 5.6(a) to also prohibit covenants restricting the right of a licensed paralegal to practice.

In practice

The opinion holds that the dividing line under RPC 5.6(a) is between an impermissible restriction or penalty on practicing after departure and a permissible valuation of a departing lawyer's financial interest. Per the opinion, a firm may not condition a lawyer's departure on a non-compete or a penalty, but it may use a valuation formula that reasonably reflects the actual loss the withdrawal causes.

Common questions

Q: Can a law firm make an associate sign a non-compete?

A: No. The opinion concludes RPC 5.6(a) bars employment or partnership agreements that restrict a lawyer's right to practice after the relationship ends.

Q: Can the partnership agreement penalize a partner who takes firm clients?

A: No. The opinion concludes lawyers may not require a withdrawing lawyer to pay a penalty as a precondition to competing.

Q: Can the firm reduce a departing partner's payout to reflect lost business?

A: Yes, qualified. The opinion concludes a partnership agreement may provide for reimbursement or a share adjustment that bears a reasonable relationship to the harm or lost value the withdrawal actually causes.

Background and rules framework

The opinion interprets Oregon RPC 5.6(a), which bars agreements restricting a lawyer's right to practice after termination of the relationship, except agreements concerning retirement benefits. It notes the rule is broader than former DR 2-108(A) and that a 2026 amendment extended it to licensed paralegals. RPC 5.6 tracks Model Rule 5.6.

Citations and references

Rules of Professional Conduct:

• Oregon RPC 5.6(a) / Model Rule 5.6 (restrictions on the right to practice)

Cases:

• Hagen v. O'Connell, Goyak & Ball, P.C., 68 Or App 700, 683 P2d 563 (1984)
• Gray v. Martin, 63 Or App 173, 663 P2d 1285 (1983)
• Cohen v. Lord, Day & Lord, 75 NY2d 95, 550 NE2d 410 (1989)

See also

• OSB Ethics Op. 2005-12: Firm Names and Office Sharing
• OSB Ethics Op. 2005-25: Suspended Lawyer Fees and Division of Fees

Source

• Landing page: https://www.osbar.org/ethics/toc.html
• Original PDF: https://www.osbar.org/_docs/ethics/2005-29.pdf