Rem Metals Corp. v. Logan
278 Or. 715, 1977 Ore. LEXIS 1021, 565 P.2d 1080 (1977)
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Rule of Law:
An employer does not have a legally protectible interest in an employee's general knowledge and skill acquired through on-the-job training. A non-competition agreement is unenforceable unless the employer can prove the employee was exposed to trade secrets, confidential customer information, or other special circumstances peculiar to the employer's business.
Facts:
- Rem Metals Corp. (Rem) produced precision titanium castings for jet aircraft engines, a highly specialized field with few competitors.
- Defendant Logan, already a titanium welder, was hired by Rem in 1969 and signed employment agreements with non-competition clauses.
- In 1972, Logan was transferred to Rem's welding department and became a 'certified' repair welder, eventually becoming Rem's most proficient welder.
- Logan was able to become certified in less than two weeks with little formal instruction.
- Rem did not have unique trade secrets in its welding department; testimony showed its procedures and techniques were standard in the industry and similar to those used by its main competitor, Precision Castparts.
- In September 1976, after Rem denied his request for a 50-cent per hour wage increase, Logan resigned.
- Logan immediately began working for Rem's competitor, Precision Castparts, at the increased wage.
Procedural Posture:
- Rem Metals Corp. filed a suit in equity in a state trial court to enforce non-competition provisions in its employment agreements with its former employee, Logan.
- The trial court entered a decree in favor of Rem, enjoining Logan from working for a competitor, Precision Castparts Corporation, for a period of six months.
- Logan, the defendant, appealed the trial court's decree to the state's highest court.
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Issue:
Does an employer have a sufficient 'protectible interest' in the general skills and knowledge of a skilled employee, acquired during employment, to enforce a non-competition agreement?
Opinions:
Majority - Tongue, J.
No. A non-competition agreement is an unreasonable restraint of trade if it is not supported by a legitimate, protectible interest of the employer. General knowledge and skills acquired by an employee through training and experience belong exclusively to the employee, even if the training was extensive or costly. The purpose of a non-competition clause is to prevent the competitive use of information or relationships that are peculiar to the employer, not to prevent the competitive use of an employee's personal skills. The burden is on the employer to prove the existence of trade secrets or other special circumstances. In this case, Rem failed to prove that its welding processes were trade secrets or that Logan possessed confidential information, therefore it had no protectible interest to justify enforcing the non-competition agreement.
Analysis:
This case clarifies the limits of non-competition agreements for skilled employees, reinforcing the principle of employee mobility. It establishes that an employee's high level of skill and efficiency, even if crucial to the employer's operations, does not in itself constitute a protectible employer interest. The decision places a significant burden on employers to demonstrate the existence of genuine trade secrets or unique confidential information to justify restraining a former employee from working in their chosen field. This precedent protects skilled workers from being contractually bound to an employer who has not imparted any truly proprietary knowledge.
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