United States: Oregon Adds Employee-Friendly Requirement To Existing Non-Compete Law… But Also Produces Company-Friendly Trade Secrets Law In Recent Court Of Appeals Case

On May 14, 2019, Oregon Governor Kate Brown signed into law HB 2992, which, as of January 1, 2020, requires an employer to provide a terminated employee with a signed, written copy of his or her non-competition agreement within 30 days of his or her termination date. Failure to do so will render the agreement voidable and unenforceable in the state of Oregon.

Backdrop for HB 2992

Under current Oregon law (ORS 653.295), a non-competition agreement is not enforceable unless the following four requirements are met: (1) the employer informs the employee of the non-competition agreement in a written employment offer received at least two weeks before the employee's first day, or the agreement is entered into upon promotion; (2) the employee is engaged in administrative, executive, or professional level work; (3) the employer has a protectable interest in requiring the non-competition agreement; and (4) the employee's gross annual salary and commissions at the time of termination exceeds the median family income for a four-person family. Furthermore, the term of a non-competition agreement may not exceed 18 months from the date of the employee's termination. Any time remaining on a non-competition agreement beyond 18 months is voidable and precluded from enforcement by any Oregon court.

HB 2992 now adds to these existing limitations, the requirement that terminated employees be provided with copies of their non-competition agreements within 30 days of termination.

Why HB 2992's Thirty-Day Requirement Matters

Because "termination" includes voluntary termination, i.e., resignation, the new law presents more creative employees with a virtually complete end-run around their non-competition agreements. In theory, such an employee could resign, subsequently request some time to reconsider, and wait until the thirty-day period elapses before immediately starting work with a competitor or engaging in some other activity in violation of his non-competition agreement. If the employer fails to provide him a copy of the agreement within the required time frame, the employer will be left without a mechanism for recourse at the end of the 30 days.

This will also be problematic in cases where a sale, merger, reduction in force, purging policy, or even simply a change in HR personnel, have resulted in destroyed, misplaced, and otherwise difficult-to-locate agreements. Without a copy of the agreement to provide, the employer, under the new law, will also be left without a mechanism for recourse at the end of the 30 days.

Employers with Oregon-based employees should consider not only instituting a policy of providing every employee his or her non-competition agreement upon termination, but also taking inventory of existing non-competition agreements and imposing strict polices for the maintenance and tracking of these agreements.

Oregon Court of Appeals Answers the Question of Whether Information Taken by Memory Maintains "Trade Secret" Protection

An Oregon appellate court recently found that information taken by memory may still constitute a "trade secret" under the Oregon Uniform Trade Secret Act and accordingly maintain its protection against disclosure.

The issue before the court of appeals in Pelican Bay Forest Products, Inc. v. W. Timber Products, Inc., was whether the trial court erred in granting summary judgment on Pelican Bay's trade secrets claim. The question turned on (1) whether the information taken by the former employee–in this case, a customer list–was a "trade secret" under ORS 646.461(4), and (2) whether the defendants "misappropriated" that information under ORS 646.461(2)(d)(C), even though the information had been memorized by the former employee. 297 Or. App. 417 (2019).

The Court's Analysis in Pelican Bay

The court of appeals ultimately held that the trial court erred in granting summary judgment for the competitors based on insufficient evidence of misappropriation. In its analysis, the court discussed the evidence Pelican Bay presented on the information taken and how the information was acquired by Timber Products, a direct competitor.

The court determined that the customer information taken and disseminated by the former employee constituted a trade secret, which Pelican Bay had made reasonable efforts to keep confidential. The court described the value of customer-specific information and client lists, particularly in the lumber trading industry which, as the defendants admitted, is competitive and requires years to build up a quality book of business. In addition, the former employee hired by Timber Products, would not have been hired but for his access to Pelican Bay's customer information, a fact that allowed the court to infer that (1) the information was not generally known to the public, and (2) that the information held economic value as a result.

The court noted that Pelican Bay had required the former employee to sign an "Employee Acknowledgement," in which he agreed to abide by the policies in Pelican Bay's Handbook. The Handbook, incorporated by reference, contained a confidentiality agreement providing that Pelican Bay's confidential proprietary information included its customer lists, and that such information was not to be shared with third parties. In addition, Pelican Bay's president had met with the former employee and personally reminded him of his confidentiality obligations–and this meeting was memorialized by written agreement.

Information Taken "by Memory"

Importantly, the appellate court rejected the defendants' argument that the information taken could not constitute a trade secret because it was taken by memory, as opposed to some tangible form (e.g., emails, copies on a USB drive, etc.). The court observed the lack of any textual support for this argument in Oregon's Uniform Trade Secret Act and stated as follows: "[N]othing in the Act suggests that information otherwise constituting a trade secret would lose that status simply because a person is able to take that information in an intangible form. . . . Rather, the terms of the Act are written broadly so as to safeguard trade secrets, no matter the form in which they may be misappropriated." 297 Or. App. at 430-31. Without this limitation in the statute, the court went on to find that the evidence presented by Pelican Bay was "sufficient to permit a reasonable factfinder to find that defendants 'misappropriated' Pelican Bay's confidential customer information. . . . in that manner." 297 Or. App. at 431 (emphasis added).

Takeaways

While this is a favorable ruling for Oregon businesses, especially those for whom customer lists are particularly crucial, employers should remain vigilant when it comes to proprietary information, and revisit their policies and agreements governing employee access and use of such information.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions