The California Myth About Non-Compete Agreements
Lane Powell Shareholder Susan K. Eggum authored an article in Oregon Business magazine’s September 2014 issue titled “The California Myth About Non-Compete Agreements.” Eggum discussed enforcement of non-compete agreements against key executives or managers who defect to a competitor and relocate their residence in states that make non-competes void. The doctrine of a protectable interest is frequently set out on the face of a state’s statute or, if not, may be found in the state’s decisional law. Employers have a protectable interest in trade secrets. The effective prosecution or defense of a non-compete in a temporary restraining order or preliminary injunction action will often involve first party and third party claims for misappropriation of trade secrets. Though not always, proving or disproving the existence, and misuse, of a trade secret bolsters the ability to prove or disprove a protectable interest. Eggum discussed the enforceability of an Oregon non-compete agreement when an employee takes a position in California, which voids non-compete agreements as a matter of public policy.
Non-compete agreements remain an important and viable tool for the protection of proprietary business information and trade secrets. Are non-compete agreements enforceable if your key employee takes a position with a competitor in California? I find that many sophisticated clients say, “No.” They are right and wrong. Your non-compete, entered in compliance with the Oregon statute, will likely be enforced by a court in California against a former key employee whose knowledge and/or possession of trade secrets will be used in the employ of a competitor, or used in the formation of a competing venture. This is true of any state, and there are a few, which make non-compete agreements void as a matter of public policy.