Facts
- Rem Metals Corporation manufactured precision titanium castings for jet aircraft engines under contract for Pratt & Whitney; only a few firms produced these castings.
- Forrest L. Logan worked for Rem as a repair welder of titanium castings and signed two standard-form employment agreements containing noncompetition clauses.
- Each agreement barred Logan, for one year after termination, from engaging in any business competing with Rem anywhere in the United States, in any capacity.
- Logan’s welding work was subject to strict Pratt & Whitney specifications; welders had to be certified by Pratt & Whitney inspectors.
- Logan was one of only two or three Pratt & Whitney-certified welders at Rem and had a higher proficiency rating than other welders.
- Logan had learned titanium welding before joining Rem; Rem’s additional training was brief and did not involve trade secrets or confidential processes.
- Evidence showed certification could be achieved quickly: other welders became qualified after about 20 hours of training, and multiple Rem welders had been certified in the past.
- Logan did not handle customers and had no access to customer lists, pricing, or other confidential business information.
- After Rem denied Logan a wage increase, he resigned and accepted employment with Precision Castparts Corporation, a direct competitor.
- Rem claimed it lost business shortly after Logan left due to inadequate welding capacity but soon trained additional welders to meet Pratt & Whitney standards.
- Rem sued in equity to enforce the noncompetition clauses.
Issues
- Whether Rem had a legally protectible interest in Logan’s skills and knowledge as a skilled welder sufficient to justify enforcement of a post-employment noncompetition agreement as a reasonable restraint of trade.
- Whether, absent trade secrets, confidential information, or special customer relationships, an injunction restraining Logan from working for a competitor could be enforced.
Decision
- The Oregon Supreme Court reversed the trial court’s decree and declined to enforce the noncompetition clause.
- The court held Rem failed to show “special circumstances” establishing a protectible interest beyond ordinary competition and an employee’s general skills.
- Because Logan’s abilities were general and not derived from proprietary or secret training, and he possessed no confidential information or customer relationships, any restraint on his post-employment work was unjustified.
- The court rejected enforcement even though the trial court had narrowed the covenant to a six-month, Oregon-only injunction.
Legal Principles
- Post-employment noncompetition agreements are disfavored restraints on trade and are enforceable only if the employer proves a legitimate protectible interest.
- A protectible interest typically requires “special circumstances,” such as trade secrets, confidential information, or customer relationships/goodwill that the employee could appropriate.
- An employer’s desire to avoid ordinary competition, even from a highly skilled employee, is not a sufficient basis to restrain the employee’s subsequent employment.
- Training that is brief, non-secret, and readily replicated does not convert an employee’s general skills into an employer-protectible interest.
Conclusion
The court refused to restrain a skilled welder from working for a competitor because the employer showed no trade secrets, confidential information, or comparable protectible interest, making the noncompetition clause an unreasonable restraint of trade.