01-0863 Heyde Companies, Inc. d/b/a Greenbriar Rehabilitation v. Dove Healthcare, LLC

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“While a covenant not to compete is typically made between an employer and its employees, it is possible, as illustrated in this case, that a restrictive covenant may be made between employers that acts as a covenant not to compete on the employees. Greenbriar argues that § 103.465 does not apply in this case because the no-hire provision was agreed to by Greenbriar and Dove, not Greenbriar and its employees. However, the explicit purpose of § 103.465, as plainly stated in the statute, is to invalidate covenants that impose unreasonable restraints on employees. This court has recognized that § 103.465 essentially deals with restraint of trade and has held that the statute applies regardless of whether a restriction is labeled a ‘non-disclosure’ provision or a ‘covenant not to compete.’ “Similarly, the fact that Greenbriar attempts to restrict its employees through a no-hire provision with Dove instead of a restrictive covenant with its employees does not change the underlying analysis. The effect of the no-hire provision is to restrict the employment of Greenbriar’s employees; it is inconsequential whether the restriction is termed a “no-hire” provision between Dove and Greenbriar or a “covenant not to compete” between Greenbriar and its employees. Greenbriar is not allowed to accomplish by indirection that which it cannot accomplish directly.” Further, the no-hire provision violates public policy.

“[T]he no-hire provision agreed to by Greenbriar and Dove unquestionably constitutes harsh treatment to Greenbriar’s employees since the employees were not aware that they would be subject to this kind of a restriction when they decided to take a job with Greenbriar. Consequently, the no-hire provision in this case constitutes an unreasonable restraint of trade in contravention of Wisconsin’s public policy.”

The decision of the Court of Appeals is affirmed.

CONCURRING OPINION: Abrahamson, Ch. J. “I agree with the dissent that the no-hire provision in the contract at issue in the present case is not directly governed by Wis. Stat. § 103.465 (1999-2000).” However, according to state common law, unreasonable restraints of trade, including contracts unreasonably restricting employment of former employees, are contrary to public policy and void.

DISSENTING OPINION: Sykes, J. “I respectfully dissent. The majority invalidates the contract at issue in this case, primarily on the basis of a statute that does not apply to contracts of this type, and, secondarily, on the basis of the public policy expressed in the inapplicable statute.”

Court of Appeals, Bablitch, J.

Attorneys:

For Appellant: Carol S. Dittmar, Teresa E. O’Halloran, Eau Claire

For Respondent: John F. Maloney, Robert K. Bultman, Milwaukee