Title: Heyde Companies, Inc. v. Dove Healthcare, LLC

State: wisconsin

Issuer: Wisconsin Supreme Court

Document:

2002 WI 131 
 
 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
01-0863-FT 
 
 
COMPLETE TITLE: 
 
 
Heyde Companies, Inc., d/b/a Greenbriar  
Rehabilitation,  
 
Plaintiff-Respondent-Petitioner, 
 
v. 
Dove Healthcare, LLC, d/b/a Dove Healthcare at 
Eau Claire, a Wisconsin Limited Liability 
Company,  
 
Defendant-Appellant. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2001 WI App 278 
Reported at:  249 Wis. 2d 32, 637 N.W.2d 437 
(Published) 
 
 
OPINION FILED: 
December 27, 2002   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
September 10, 2002   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Eau Claire   
 
JUDGE: 
Eric J. Wahl   
 
 
 
JUSTICES: 
 
 
CONCURRED: 
ABRAHAMSON, C.J., concurs (opinion filed).   
 
DISSENTED: 
SYKES, J., dissents (opinion filed). 
BRADLEY, J., joins dissent.   
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For the plaintiff-respondent-petitioner, there were briefs 
by John F. Maloney, Robert K. Bultman and McNally, Maloney & 
Peterson, S.C., Milwaukee and oral argument by Robert K. 
Bultman. 
 
For the defendant-appellant, there was a brief by Carol S. 
Dittmar, Teresa E. O’Halloran and Garvey, Anderson, Johnson, 
Geraci & Mirr, S.C., Eau Claire and oral argument by Carol S. 
Dittmar. 
 
 
2002 WI 131 
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  01-0863-FT  
(L.C. No. 
00-CV-158) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Heyde Companies, Inc., d/b/a Greenbriar  
Rehabilitation,  
 
          Plaintiff-Respondent-Petitioner, 
 
     v. 
 
Dove Healthcare, LLC, d/b/a Dove  
Healthcare at Eau Claire, a Wisconsin  
Limited Liability Company,  
 
          Defendant-Appellant. 
 
FILED 
 
DEC 27, 2002 
 
Cornelia G. Clark 
Clerk of Supreme Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed.   
 
¶1 
WILLIAM 
A. 
BABLITCH, 
J.   Heyde 
Companies, 
Inc. 
petitions this court to review a decision of the court of 
appeals,1 which reversed the judgment of the circuit court for 
Eau Claire County, Eric J. Wahl, Judge.  The court of appeals 
held that an employee's individual right and freedom to contract 
may not be restricted by a contract between two employers unless 
the employee is aware of and consents to such a restriction.  We 
                                                 
1 Heyde Companies, Inc v. Dove Healthcare, LLC, 2001 WI App 
278, 249 Wis. 2d  32, 637 N.W.2d  437. 
No. 
01-0863-FT   
 
2 
 
agree.  A no-hire provision agreed to by employers that 
restricts the employment opportunities of employees without 
their 
knowledge 
and 
consent 
constitutes 
an 
unreasonable 
restraint 
of 
trade, 
in 
violation 
of 
Wis. Stat. § 103.465 
(restrictive covenants) and the public policy of the state.  
Accordingly, we hold that the no-hire provision contained in the 
agreement between Greenbriar and Dove is unenforceable. 
¶2 
Dove Healthcare, LLC (Dove) is a health care provider 
that operates nursing homes.  Heyde Companies, Inc. (Heyde) owns 
Greenbriar Rehabilitation (Greenbriar), which furnishes physical 
therapists to nursing home facilities.  In June 1997, Dove and 
Greenbriar 
entered 
into 
a 
Therapy 
Services 
Agreement 
(Agreement), 
whereby 
Greenbriar 
was 
to 
provide 
physical 
rehabilitation services and place physical therapists at Dove's 
Eau Claire facility.  Although the physical therapists worked at 
Dove's facility, they remained at-will employees of Greenbriar.   
¶3 
The Agreement between Dove and Greenbriar contained a 
"no-hire" provision, which stated in relevant part:  
[Dove] acknowledges and agrees that it will not, 
directly or indirectly, solicit, engage, permit to be 
engaged or hire any Greenbriar therapists or therapist 
assistants 
to 
provide 
services 
for 
[Dove] 
independently, as an employee of [Dove] or as an 
employee of a services provider other than Greenbriar 
or otherwise during the term of this Agreement.  
 . . . and for a period of one (1) year thereafter 
without the prior written consent of Greenbriar.  If, 
after 
prior 
written 
consent 
by 
Greenbriar, 
any 
Greenbriar therapists or therapist assistants are 
hired 
or 
utilized 
by 
[Dove], 
[Dove] 
shall 
pay 
Greenbriar a fee of fifty percent (50%) of the subject 
Greenbriar employee's annual salary. 
No. 
01-0863-FT   
 
3 
 
¶4 
On October 26, 1999, Dove terminated its Agreement 
with Greenbriar, effective December 31, 1999.  Shortly after 
terminating the Agreement, Dove hired one current and three 
former Greenbriar employees.  Dove did not seek Greenbriar's 
written consent, nor did it pay 50% of the employees' salaries 
in accordance with the no-hire provision.   
¶5 
The employees hired by Dove testified in their 
affidavits that they did not know about the no-hire provision in 
the 
Agreement 
between 
Greenbriar 
and 
Dove 
that 
placed 
restrictions on their ability to be employed by Dove.  Some of 
the employees hired by Dove testified that they inquired whether 
they would be bound by a non-compete agreement and were told by 
Greenbriar that they would not be subject to such restrictions.   
¶6 
In 1999, Greenbriar had contracts with approximately 
35 nursing home facilities, including Dove, and employed 
approximately 33 therapists out of the 273 therapists who worked 
in the Eau Claire/Chippewa Falls area.  Greenbriar primarily 
contracted with facilities located in the Eau Claire/Chippewa 
Falls area, although it also had contracts with a few facilities 
in the eastern part of the state.   
¶7 
Greenbriar filed suit against Dove on March 10, 2000, 
alleging that Dove breached the no-hire provision in the 
Agreement and sought payment of the 50% contractual fee for the 
Greenbriar employees who were hired by Dove.  Dove moved for 
summary judgment, claiming that the no-hire provision was 
unenforceable and an unlawful restraint of trade.  The circuit 
court denied Dove's motion for summary judgment.  Greenbriar and 
No. 
01-0863-FT   
 
4 
 
Dove stipulated to findings of fact on liability and presented 
evidence on the issue of damages.  The circuit court entered a 
judgment 
in 
favor 
of 
Greenbriar 
and 
awarded 
Greenbriar 
liquidated damages in the amount of $62,124.40. 
¶8 
Dove appealed the circuit court's decision.  On 
October 23, 2001, the court of appeals reversed the judgment of 
the circuit court and held that the no-hire provision was an 
unreasonable restraint of free trade because the employees had 
no knowledge of the provision and did not sign any covenant not 
to compete.  Greenbriar petitioned this court for review.   
¶9 
At issue is whether a no-hire provision contained in a 
contract between employers, without the knowledge and consent of 
the affected employees, is unenforceable as an unreasonable 
restraint of trade.  Determining whether no-hire provisions are 
enforceable is a question of law.  This court reviews questions 
of law de novo, benefiting from the analyses of the circuit 
court and court of appeals.  In re Corey J.G., 215 Wis. 2d 395, 
405, 572 N.W.2d 845 (1998). 
¶10 In general, parties are free to contract as they see 
fit, provided that the contract does not impose obligations that 
are contrary to public policy.  Journal/Sentinel, Inc. v. Pleva, 
155 Wis. 2d 704, 710-11, 456 N.W.2d 359 (1990).  Public policy 
may be expressed by statute, administrative regulation, or by 
the court's expression of the policy of the common law.  N. 
States Power Co. v. Nat'l Gas Co., 2000 WI App 38, 232 
Wis. 2d 541, 545-46, 606 N.W.2d 613 (Ct. App. 1999) (citing 
Pedrick v. First Nat'l Bank, 267 Wis. 436, 438-39, 66 N.W.2d 154 
No. 
01-0863-FT   
 
5 
 
(1954); 
M&I 
First 
Nat'l 
Bank 
v. 
Episcopal 
Homes, 
195 
Wis. 2d 485, 507, 536 N.W.2d 175 (Ct. App. 1995); Hawkins Realty 
Co. v. Hawkins State Bank, 205 Wis. 406, 417, 236 N.W. 657 
(1931)). 
 
In 
analyzing 
the 
enforceability 
of 
a 
no-hire 
provision, 
we 
review Wis. Stat. § 103.465(1999-2000),2 
which 
deals with restrictive covenants in employment contracts. 
I 
¶11 Section 103.465 was enacted in response to Fullerton 
Lumber Co. v. Torborg, 270 Wis. 133, 70 N.W.2d 585 (1955), where 
the court enforced an invalid covenant not to compete insofar as 
it was reasonable.  Id. at 147.  The court in Fullerton Lumber 
held that the 10-year period prescribed under the restraint in 
question was unreasonable, but that a 3-year period was 
reasonable; accordingly, the court upheld the covenant for a 3-
year period.  Id.  The legislature disagreed with this analysis 
and enacted § 103.465 in order to invalidate overly broad 
covenants in their entirety, and not allow courts to give effect 
to invalid covenants even 
to the 
extent 
that 
they are 
                                                 
2All references to the Wisconsin Statutes are to the 1999-
2000 version unless otherwise indicated. 
 103.465 Restrictive covenants in employment contracts.  A 
covenant by an assistant, servant or agent not to compete with 
his or her employer or principal during the term of the 
employment 
or 
agency, 
or 
after 
the 
termination 
of 
that 
employment or agency, within a specified territory and during a 
specified 
time 
is 
lawful 
and 
enforceable 
only 
if 
the 
restrictions imposed are reasonably necessary for the protection 
of the employer or principal.  Any covenant, described in this 
subsection, imposing an unreasonable restraint is illegal, void 
and unenforceable even as to any part of the covenant or 
performance that would be a reasonable restraint.   
No. 
01-0863-FT   
 
6 
 
reasonable.  
Streiff v. 
Am. 
Family 
Mut. 
Ins. 
Co., 118 
Wis. 2d 602, 608, 348 N.W.2d 505 (1984).  Under § 103.465, "Any 
covenant, described in this subsection, imposing an unreasonable 
restraint is illegal, void and unenforceable even as to any part 
of the covenant or performance that would be a reasonable 
restraint."   
¶12 Greenbriar 
argues 
that 
Wis. Stat. § 103.465 
was 
enacted to protect employees, who often have unequal bargaining 
power, from unreasonable covenants not to compete with their 
employers.  Greenbriar asserts that, on its face, § 103.465 only 
applies to restrictive covenants between employers and their 
employees, and not agreements between employers.   
¶13 Wisconsin 
Stat. § 103.465 
is 
broadly 
entitled 
"Restrictive covenants in employment contracts," although it 
only refers to covenants between employers and employees.  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-
No. 
01-0863-FT   
 
7 
 
disclosure" provision or a "covenant not to compete."  Tatge v. 
Chambers & Owen, Inc., 219 Wis. 2d  99, 111-12, 579 N.W.2d 217 
(1998); see also Gary Van Zeeland Talent, Inc. v. Sandas, 84 
Wis. 2d 202, 218-20, 267 N.W.2d 242 (1978).  In Tatge, this 
court reasoned that "it would be an exercise in semantics to 
overlook Wis. Stat. § 103.465 merely because paragraph 1 of the 
agreement is not labeled a 'covenant not to compete.'"  Tatge, 
219 Wis. 2d at 112.   
¶14 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.  For example, in holding 
that a state statute violated the 13th Amendment of the U.S. 
Constitution, the U.S. Supreme Court reasoned that "What the 
state may not do directly it may not do indirectly. . . . [An] 
act of Congress deprives of effect all legislative measures of 
any state through which, directly or indirectly, the prohibited 
thing . . . may be established or maintained . . . ."  Bailey v. 
Alabama, 
219 
U.S. 
219, 
244-45 
(1911) 
(emphasis 
added).  
Likewise, in analyzing a state tax statute, the Court stated 
that the "statute seeks to accomplish by indirection that which 
No. 
01-0863-FT   
 
8 
 
the state is constitutionally prohibited from doing directly.  
Such 
attempted evasion of 
the Government's 
constitutional 
immunity from state taxation cannot legally be permitted to 
succeed."  United States v. City of Detroit, 355 U.S. 466, 478-
79 (1958).  This court has also recognized that "[t]here is no 
doubt of the general truth, that, in questions of this nature 
[constitutionality of a statute], the means are not to be 
regarded, but only the end, and that the restraints of the 
fundamental law cannot be avoided by indirection."  State ex 
rel. Haswell v. Cram, 16 Wis. 343, 345 (1863).   
¶15 In addition, it is well-established under statutory 
canons of construction that social legislation and statutes 
promoting a public interest are to be liberally construed in 
favor of those intended to benefit from them.  See, e.g., 
Paikoff v. Harris, 185 Misc.2d 372, 377 (N.Y. App. Term 1999); 
Indiana v. Kokomo Tube Co., 426 N.E.2d 1338, 1345 (Ind. Ct. App. 
1981).  In the context of penal statutes, this court has held 
that "if strict construction thwarts the purpose of the 
legislation, the rule of strict construction does not apply" and 
that the "dominating purpose of all [statutory] construction is 
to carry out the legislative purpose."  German v. Wisconsin 
Dep't of Transp., 2000 WI 62, ¶27, 235 Wis. 2d 576, 612 
N.W.2d 50 (citing State v. Kittilstad, 231 Wis. 2d 245, 262, 603 
N.W.2d 732 (1999); State v. Rabe, 96 Wis. 2d 48, 70, 291 
No. 
01-0863-FT   
 
9 
 
N.W.2d 809 (1980))3.  We therefore find unpersuasive Greenbriar's 
argument that the statute on its face does not apply.  
¶16 It cannot be disputed that this no-hire provision acts 
as a restrictive covenant on Greenbriar's employees.  Therefore, 
to determine its enforceability, we employ the five-factor 
analysis that is used to evaluate covenants not to compete.  
Lakeside 
Oil 
Co. 
v. 
Slutsky, 
8 
Wis. 2d 157, 
162-63, 
98 
N.W.2d 415 (1959).  A restrictive covenant must: (1) be 
necessary to protect the employer; (2) provide a reasonable time 
limit; (3) provide a reasonable territorial limit; (4) not be 
harsh or oppressive to the employee; and (5) not be contrary to 
public policy.  Id.; see also Streiff, 118 Wis. 2d at 613 n.5.  
In addition, the following canons of construction are applied to 
restrictive covenants: (1) they are prima facie suspect; (2) 
they must withstand close scrutiny to pass legal muster as being 
reasonable; (3) they will not be construed to extend beyond 
their proper import or further than the language of the contract 
absolutely requires; and (4) they are to be construed in favor 
of the employee.  Streiff, 118 Wis. 2d at 610-11 (citing 
                                                 
3 See also Wisconsin Indus. Sch. for Girls v. Clark County, 
103 Wis. 651, 659, 79 N.W. 422 (1899) (statute must be construed 
to give effect to the evident legislative intent though the 
result seems contrary to the strict letter of the statute); 
Fleischmann Const. Co. v. United States, 270 U.S. 349, 360 
(1926) (strict letter of an act must yield to its evident spirit 
and purpose in order to give effect to the intent of the 
legislature); Paikoff v. Harris, 185 Misc.2d 372, 376 (N.Y. App. 
Term 1999)(in construing statute, court should consider the 
mischief sought to be remedied and construe statute so as to 
suppress the evil and advance the remedy"). 
No. 
01-0863-FT   
 
10 
 
Zimmerman v. Brennan, 78 Wis. 2d 510, 514-15, 254 N.W.2d 719 
(1977); Gary Van Zeeland Talent, 84 Wis. 2d at 218-19).    
¶17 Greenbriar argues that the no-hire provision satisfies 
the first factor because it is necessary for protecting its 
interest in maintaining its employees, and to avoid serving as 
an involuntary employment recruiting agency for Dove.  Although 
some kind of restriction might be necessary, Greenbriar can 
adequately protect itself through a reasonable covenant not to 
compete that complies with Wis. Stat. § 103.465.  Therefore, 
contrary to Greenbriar's claim, the no-hire provision with Dove 
is not necessary for its protection.   
¶18 With respect to the second factor, the one-year time 
limit seems reasonable.   
¶19 With respect to the third factor, the territorial 
restriction in this case is potentially problematic.  Greenbriar 
acknowledges that it has contracts with other nursing home 
facilities, in addition to Dove, which contain the same no-hire 
provision. 
 Consequently, 
the employment opportunities of 
Greenbriar's employees are restricted not only with respect to 
Dove, but also with respect to all of the other facilities that 
have contracts with Greenbriar.  In fact, Greenbriar is seeking 
damages from Dove for an employee who never even worked at the 
Dove 
facility. 
 
In 
1999, 
Greenbriar 
had 
contracts 
with 
approximately 
35 
facilities, 
including 
Dove, 
throughout 
Wisconsin. 
 
The 
no-hire 
provision 
restricts 
Greenbriar's 
employees with respect to all of these facilities, which is 
arguably an unreasonable territorial restriction.  Greenbriar 
No. 
01-0863-FT   
 
11 
 
does not dispute that these facilities would have to pay the 50% 
fee if any of them wanted to hire a Greenbriar employee, but it 
claims that there is no evidence that Greenbriar therapists 
would be less likely to be hired because of the fee.  We cannot 
agree.  It is apparent that a nursing home facility would prefer 
to hire therapists who are not subject to a 50% salary "fee" 
that must be paid to a former employer, thereby putting the 
Greenbriar therapists at a disadvantage in obtaining employment.   
¶20 Notwithstanding whether the territorial restriction of 
the no-hire provision is reasonable, with respect to the fourth 
and fifth factors, it is clear that the no-hire provision is 
harsh and oppressive to Greenbriar's employees and is contrary 
to public policy.  The former Greenbriar employees who were 
hired by Dove testified that they had no knowledge of the no-
hire provision and that Greenbriar did not ask them to sign a 
non-compete agreement.  One of the employees hired by Dove 
testified that she specifically asked Greenbriar whether she 
would be bound by a non-compete agreement and was told that she 
would not be subject to such restrictions.  The court of appeals 
has held that a valid covenant not to compete requires knowledge 
and consideration by the affected employee.  NBZ, Inc. v. 
Pilarski, 185 Wis. 2d 827, 835-36, 520 N.W.2d 93 (Ct. App. 
1994).  This court has also implicitly recognized the necessity 
of consideration in referencing an employee's decision to sign a 
covenant not to compete that he or she deems unreasonable.  
Tatge, 219 Wis. 2d at 116.  
No. 
01-0863-FT   
 
12 
 
¶21 Greenbriar 
is not 
prevented 
from 
protecting its 
interest in maintaining its employees, but it must do so through 
a 
valid 
restrictive 
covenant 
in 
compliance 
with 
Wis. Stat. § 103.465.  Greenbriar is not allowed to circumvent 
the protections under § 103.465 by restricting the employment 
opportunities of its employees through contracts with other 
employers without their employees' knowledge and consent.  An 
employer cannot indirectly restrict employees in a way that it 
cannot do directly under § 103.465.  At the very least, 
§ 103.465 requires that employees know that they are subject to 
a restrictive covenant and that they consent to such a 
restriction. 
 
Accordingly, 
the 
no-hire 
provision, 
which 
restricts Greenbriar's employees without their knowledge and 
consent, is harsh and oppressive to the employees and is 
contrary to public policy, in violation of § 103.465.          
¶22 Furthermore, the fundamental right of a person to make 
choices about his or her own employment is well-established.  
"[N]o one has the legal right . . . to deprive a person of the 
right to labor for whomsoever he will, with the consent of such 
other."  Cheek v. Prudential Ins. Co. of America, 192 S.W. 387, 
393 (Mo. 1916); aff'd by Prudential Ins. Co. v. Cheek, 259 U.S. 
530, 547-48 (1922) ("[C]orporations had no lawful right to enter 
into a combination or agreement the effect of which was to . . . 
deprive former employees of their constitutional right to seek 
employment.").  According to the U.S. Supreme Court, an 
individual's right to make choices about his or her own 
No. 
01-0863-FT   
 
13 
 
employment may not be negated by business decisions that 
circumscribe the employment relationship. 
That freedom in the making of contracts of 
personal employment, by which labor and other services 
are exchanged for money or other forms of property, is 
an elementary part of the rights of personal liberty 
and private property . . . .  
But the right to conduct business . . . and as 
such to enter into relations of employment with 
individuals, 
is 
not 
a 
natural 
or 
fundamental 
right . . . and 
a 
State 
in 
authorizing 
its 
own 
corporations . . . may 
qualify 
the 
privilege 
by 
imposing such conditions and duties as reasonably may 
be deemed expedient in order that the corporation's 
activities may not operate to the detriment of the 
rights of others [i.e. employees] with whom it may 
come in contact."   
Cheek, 259 U.S. at 536.    
¶23 Thus, the no-hire provision between Greenbriar and 
Dove is unenforceable because it is harsh and oppressive to the 
employees, is against public policy, and goes beyond what is 
necessary for Greenbriar to protect its legitimate interest in 
protecting the investment it has in its employees.  Greenbriar 
is essentially attempting to enforce a covenant not to compete, 
which it is allowed to do, but the restriction must be 
reasonable 
in 
accordance 
with 
the 
requirements 
under 
Wis. Stat. § 103.465.   
¶24 In addition, the few cases from other jurisdictions 
that have upheld no-hire provisions are distinguishable from the 
case at bar.  Greenbriar points out that the Virginia Supreme 
Court has addressed the same issue and held that a no-hire 
provision between employers was enforceable and not against 
No. 
01-0863-FT   
 
14 
 
public policy.  Therapy Serv., Inc. v. Crystal City Nursing 
Ctr., Inc., 389 S.E.2d 710 (Va. 1990).  The court in Therapy 
Services analyzed whether the no-hire provision constituted an 
unreasonable restraint of trade under anti-trust principles.  
Importantly, the court concluded that the "restriction is 
reasonable . . . because it does not in any way inhibit the 
affected employees from seeking employment as therapists with 
any employer other than Crystal City."  Id. at 712.  In this 
case, the employment opportunities of the Greenbriar employees 
are restricted with respect to all of the facilities that 
Greenbriar has a contract with, even if an employee has never 
worked at any of the other facilities except for Dove.  
Similarly, in Webb v. West Side Dist. Hosp., 144 Cal. App. 3d 
946 (Cal. App. 1983), the court upheld a no-hire provision 
because it was limited to the physicians who had been placed at 
the hospital by Webb.  The court reasoned that the clause was 
not unreasonable because it did not include physicians employed 
by Webb who had never actually worked at the hospital.  
(distinguishing Hospital Consultants, Inc. v. Potyka, 531 S.W.2d 
657, 665 (Tex. Civ. App. 1975), which held that a no-hire 
provision was unenforceable because it went beyond what was 
necessary to protect Potyka's interest by restricting physicians 
who had never worked at the hospital).    
II 
¶25 Notwithstanding whether the no-hire provision between 
Greenbriar 
and 
Dove 
is 
a 
facial 
violation 
of 
Wis. Stat. § 103.465, the provision nonetheless clearly violates 
No. 
01-0863-FT   
 
15 
 
the public policy of the state as expressed through the common 
law and § 103.465 for all the reasons stated above.  As 
discussed in section I, the 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.  As this court has stated, if a "contract is void for 
 . . . reasons, such as public policy . . . or creates an undue 
hardship on the employee a court of equity will not enforce it."  
Lakeside Oil, 8 Wis. 2d at 162.     
¶26 In sum, the no-hire provision in the Agreement between 
Greenbriar and Dove is an unreasonable restraint of trade and 
went beyond what was necessary for Greenbriar to protect its 
interest 
in 
maintaining 
its 
employees. 
 
Greenbriar 
can 
adequately protect its interest through a reasonable restrictive 
covenant in accordance with Wis. Stat. § 103.465.  A no-hire 
provision 
that 
restricts 
the 
employment 
opportunities 
of 
employees without their knowledge and consent is harsh and 
oppressive 
to 
the 
employees, 
in 
violation 
of 
Wis. Stat. § 103.465 and the public policy of the state.  
Accordingly, we hold that the no-hire provision in this case is 
unenforceable.  
By the Court.—The decision of the court of appeals is 
affirmed. 
No.  01-0863.ssa 
 
1 
 
¶27 SHIRLEY S. ABRAHAMSON, CHIEF JUSTICE   (concurring).  
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). 
¶28 The plain language of Wis. Stat. § 103.465 limits its 
scope to covenants "by an assistant, servant or agent not to 
compete with his or her employer or principal."4  The contract at 
issue was not made by an assistant, servant, or agent and the 
employer.  Rather, it was between two employers, restricting one 
employer's ability to hire former employees of the other 
employer. 
 
By 
this 
indirection, 
the 
employees' 
future 
opportunities of employment were restricted. 
 
¶29 Section 103.465 does not, however, occupy the field of 
contracts in restraint of trade.  Section 103.465 expresses a 
distinct legislative policy of discouraging certain covenants 
not to compete as an unreasonable restraint of trade.  
¶30 The common law of the state survives the enactment of 
§ 103.465.  According to the common law of this state, 
unreasonable 
restraints 
of 
trade, 
including 
contracts 
                                                 
4 Wis. Stat. § 103.465 (1999-2000). 
No.  01-0863.ssa 
 
2 
 
unreasonably restricting employment of former employees, are 
contrary to public policy and void.5 
¶31 I write separately to explain that the no-hire 
contract 
in 
the 
present 
case 
severely 
restricts 
future 
employment opportunities of employees without their knowledge or 
consent.  People agreed to work as Greenbriar's at-will 
employees (meaning they were free to leave employment at any 
time and Greenbriar was free to terminate their employment at 
anytime for almost any reason).  When the at-will employment 
ceased, the former Greenbriar employees would find, to their 
surprise, that they were handicapped in getting new employment 
by a secret deal between Greenbriar and another business.   
¶32 I agree with the court of appeals: "The no-hire 
provision violates public policy by restricting Greenbriar 
therapists the right to freely sell their skills in the labor 
market.  Without signing any agreement or even being given 
notice . . . current 
and 
former 
Greenbriar 
therapists 
are 
                                                 
5 Section 103.465 "does not change the prior law of what 
constitute unreasonable restraints because the section only 
requires the restrictions as to time and place to be reasonably 
necessary for the protection of the employer.  If such a 
contract is void for other reasons, such as public policy, or 
sec. 133.01(1), Stats., or creates an undue hardship upon the 
employee a court of equity will not enforce it."  Lakeside Oil 
Co. v. Slutsky, 8 Wis. 2d 157, 162, 98 N.W.2d 415 (1959).  See 
also Streiff v. Am. Family Mut. Ins. Co., 118 Wis. 2d 602, 613 
n.5, 348 N.W.2d 505 (1984); Holsen v. Marshall & Ilsley Bank, 52 
Wis. 2d 281, 190 N.W.2d 189 (1971). 
For discussions of contracts in restraint of trade and 
against public policy, see, e.g., Restatement of Contracts 
§§ 514-15 (1932); Restatement (Second) of Contracts §§ 178-79, 
186-88 (1979). 
No.  01-0863.ssa 
 
3 
 
restricted from being employed by these facilities, unless 
Greenbriar gives consent and unless the facilities are willing 
to pay the fee."6 
¶33 To 
assert 
that 
Greenbriar's 
employees 
are 
not 
"unreasonably restricted or otherwise hurt by the no-hire clause 
in the contract between Greenbriar and Dove"7 is to ignore the 
harsh realities of the job market.  The dissent asks, "Why 
should Dove, which freely agreed to pay the 50 percent premium 
if it hired a Greenbriar employee, be entitled to avoid its 
contractual obligations by asserting that someone else has 
sustained a purely hypothetical injury?"8  The law of this State 
answers this question:  freedom to contract, like other 
freedoms, has limitations. 
¶34 The limitation on the freedom to contract in the 
present case is the public's interest in not allowing businesses 
to unduly and unfairly limit the ability of former employees to 
seek new employment.  It is an unfair and an undue limitation on 
an employee's right to seek employment for an employer to 
contract away an employee's freedom of future employment without 
that employee’s ever knowing about or consenting to the 
limitation.  Employees should be able to decide whether they 
want to work for Greenbriar under these conditions.  The secret 
deal cut in the present case between two businesses affecting 
                                                 
6 Heyde Cos., Inc. v. Dove Healthcare, LLC, 2001 WI App 278, 
¶13, 249 Wis. 2d 32, 637 N.W.2d 437. 
7 Dissent at ¶51. 
8 Dissent at ¶57. 
No.  01-0863.ssa 
 
4 
 
non-consenting employees is unduly harsh and oppressive to the 
employees and is therefore contrary to the common law and public 
policy of the state of Wisconsin. 
¶35 For the foregoing reasons, I concur in affirming the 
decision of the court of appeals. 
 
 
No.  01-0863-FT.dss 
 
1 
 
¶36 DIANE S. SYKES, J.   (dissenting).  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. 
¶37  The majority analyzes this case as though it were a 
lawsuit between an employer and a former employee, but it is 
not.  It is a breach of contract lawsuit between two 
sophisticated businesses.  The contract is in writing and was 
freely entered into with no suggestion of undue influence or 
unequal bargaining power.  One party has admittedly breached the 
contract and is now attempting to invoke statutory and public 
policy arguments that belong to employees, not businesses, in an 
attempt to avoid liability for the breach.  The majority, like 
the court of appeals, has fallen for this subterfuge, and in so 
doing, has created a rule of law that effectively prevents 
companies 
in 
this 
state 
from 
achieving 
any 
contractual 
protection for their investments in employee recruitment and 
training against raids by their customers. 
¶38  The majority concludes that the no-hire provision in 
the 
contract 
between 
Greenbriar 
Rehabilitation 
and 
Dove 
Healthcare violates Wis. Stat. § 103.465 and is therefore 
unenforceable.  The statute, however, appears in the chapter 
entitled "Employment Regulations," and by its terms applies only 
to restrictive covenants in employment contracts:   
Restrictive covenants in employment contracts 
A covenant by an assistant, servant or agent not to 
compete with his or her employer or principal during 
the term of the employment or agency, or after the 
No.  01-0863-FT.dss 
 
2 
 
termination of that employment or agency, within a 
specified territory and during a specified time is 
lawful and enforceable 
only 
if 
the restrictions 
imposed are reasonably necessary for the protection of 
the employer or principal.  Any covenant, described in 
this subsection, imposing an unreasonable restraint is 
illegal, void and unenforceable even as to any part of 
the covenant or performance that would be a reasonable 
restraint.     
Wis. Stat. § 103.465 (emphasis added). 
 
¶39  The Greenbriar/Dove contract is plainly not an 
employment contract.  It is not a "covenant by an 
assistant, servant or agent not to compete with his or her 
employer" within the meaning of Wis. Stat. § 103.465.  It 
is a contract between two businesses for the provision of 
professional 
services. 
 
The 
majority 
dismisses 
this 
distinction as "inconsequential."  Majority op., ¶14.  To 
the contrary, it is dispositive.  The statute does not 
apply. 
¶40  Dove contracted to receive rehabilitation therapy 
services from Greenbriar, and in so doing, agreed not to hire 
Greenbriar's employees, without Greenbriar's consent, for a 
specified term (while the contract for rehabilitation services 
was in effect and for one year thereafter).  Dove further agreed 
to pay a specified penalty (50 percent of the employee's annual 
salary) if it hired a Greenbriar employee. 
¶41  The majority states categorically: "[i]t cannot be 
disputed that this no-hire provision acts as a restrictive 
covenant on Greenbriar's employees."  Majority op., ¶16.  Well, 
yes, it can, because the truth is exactly the opposite: what is 
actually undisputed and undisputable here is that the no-hire 
clause did not bind or restrict Greenbriar's employees in any 
way.  It imposed no territorial or other restriction whatsoever 
on where or with whom they might seek or obtain employment. 
No.  01-0863-FT.dss 
 
3 
 
¶42  Greenbriar's at-will employee therapists were thus 
perfectly free to leave Greenbriar at any time and sell their 
services anywhere in the marketplace, even in competition with 
Greenbriar, and even to Greenbriar's customers.  Greenbriar's 
customer, 
Dove, 
was 
contractually 
required 
to 
obtain 
Greenbriar's consent should it wish to hire any Greenbriar 
employee, 
and 
further 
required 
to 
compensate 
Greenbriar 
according to the terms of the contract if it did so.  The no-
hire provision conferred rights and imposed obligations on 
supplier and customer, not employer and employee.  It therefore 
cannot be construed to be——or even to "act as"——an employee 
covenant not-to-compete of the type governed by Wis. Stat. 
§ 103.465.  See Majority op., ¶¶13, 16. 
¶43  That the no-hire clause made Greenbriar's employees 
somewhat more difficult and expensive for Dove to hire does not 
trigger the application of Wis. Stat. § 103.465 or otherwise 
transform this business agreement into an employment contract 
for 
purposes 
of 
determining 
the 
statute's 
applicability.  
Greenbriar employed 33 therapists in the Eau Claire/Chippewa 
Falls region.  There were 273 therapist jobs in the area, giving 
Greenbriar a market share of approximately 12 percent.  Clearly, 
the nursing facilities 
that 
were 
Greenbriar's 
customers——
including 
Dove——represent 
only 
a 
small 
fraction 
of 
the 
marketplace for therapists in the Eau Claire/Chippewa Falls 
area. 
¶44  The majority states that the "explicit purpose" of the 
statute is "to invalidate covenants that impose unreasonable 
No.  01-0863-FT.dss 
 
4 
 
restraints on employees."  Majority op., ¶13.  Actually, the 
statute states that "[a]ny covenant, described in this section, 
imposing 
an 
unreasonable 
restraint 
is 
illegal, 
void 
and 
unenforceable . . . ."  Wis. Stat. § 103.465 (emphasis added).  
If a covenant is not one that is described in the subsection 
(that is, a covenant between an employer and employee), it 
cannot possibly violate the statute or otherwise implicate the 
statute's purpose.  
¶45  The majority states that "Greenbriar is not allowed to 
accomplish by indirection that which it cannot accomplish 
directly."  Majority op., ¶14.  If by this the majority means 
that the no-hire provision is essentially the equivalent of an 
employee non-compete covenant, it is simply incorrect, for the 
reasons noted above.  The contract between Greenbriar and Dove 
did not in any way bind Greenbriar's employees or prohibit their 
freedom of movement in the employment marketplace.  It merely 
imposed a financial obligation on Greenbriar's client, Dove, 
should it wish to hire a Greenbriar employee. 
¶46  There is another problem with the majority's statement 
that 
the 
no-hire 
provision 
attempts 
to 
"accomplish 
by 
indirection that which it cannot accomplish directly": it 
premises 
the 
determination 
of 
the 
statute's 
threshold 
applicability on a conclusion that it has been violated.  This 
is odd reasoning, a little like saying "the statute governs 
employment agreements, which this obviously is not, but if it 
were, it would violate the statute, and therefore the statute 
must apply." 
No.  01-0863-FT.dss 
 
5 
 
¶47  The majority relies on Tatge v. Chambers & Owen, Inc., 
219 Wis. 2d 99, 579 N.W.2d 217 (1998), and Gary Van Zeeland 
Talent, Inc. v. Sandas, 84 Wis. 2d 202, 267 N.W.2d 242 (1978), 
but those cases concerned restrictive covenants contained in 
employment agreements, which, unlike the agreement at issue 
here, are squarely within the statute. 
¶48  The majority also relies on broad language from 
several older cases regarding state statutes that "indirectly" 
contravene the constitution.  Majority op., ¶14.  These cases 
are limited to constitutional violations, and do not support the 
notion that a party can avoid liability for breach of contract 
by invoking an inapplicable statute or alleging a violation of 
the rights of third parties who have suffered no injury.  In any 
event, there is no constitutional argument present here. 
¶49  Also, and perhaps most importantly, the scope of the 
majority's 
direction/indirection 
holding 
is 
uncertain. 
The 
majority places no limits on it, and so its sweep is potentially 
quite broad.  Is it true that henceforward courts will have the 
authority to declare that a facially inapplicable statute 
nevertheless 
applies 
because 
it 
has 
been 
violated 
"by 
indirection"?  This seems rather revolutionary. 
¶50  If the statute does not apply, then the expression of 
public policy contained in it cannot possibly be implicated.  
The majority correctly notes that the statute was enacted in 
response to Fullerton Lumber Co. v. Torborg, 274 Wis. 478, 80 
N.W.2d 461 (1957), and was intended to protect employees from 
those employers who, because of their superior bargaining power, 
No.  01-0863-FT.dss 
 
6 
 
could impose unreasonable and excessively restrictive non-
compete covenants in employment agreements.  Streiff v. American 
Family Mut. Ins. Co., 118 Wis. 2d 602, 608-09, 348 N.W.2d 505 
(1984).  That public policy is not implicated in a contract 
between two businesses such as the one at issue here. 
¶51  Again, Greenbriar's employees are not unreasonably 
restricted or otherwise hurt by the no-hire clause in the 
contract between Greenbriar and Dove.  Indeed, Dove hired 
Greenbriar's employees despite the no-hire clause.  Nonetheless, 
the majority now concludes that a purely theoretical injury to 
Greenbriar's employees (which hardly rises to the level of an 
unreasonable or excessive restraint) somehow excuses Dove's 
liability for its breach of contract.  
¶52  The majority's analysis of the no-hire provision under 
the five-part test for a valid employee non-compete under Wis. 
Stat. § 103.465 is also questionable.  The majority concludes 
that the no-hire provision was unnecessary for the protection of 
the employer because the employer could have protected its 
investment by entering into non-compete agreements with its 
employees instead. Majority op., ¶17. Greenbriar's therapists 
were at-will employees.  From the employees' standpoint (and the 
statute is intended to protect the interests of employees), how 
could an employee non-compete agreement possibly be considered 
an improvement over a no-hire agreement?  In Tatge, the 
plaintiff, an at-will employee, was fired for refusing to sign a 
non-compete/non-disclosure agreement, and this court said he had 
no recourse.  Tatge, 219 Wis. 2d at 123.  An employee non-
No.  01-0863-FT.dss 
 
7 
 
compete would restrict the employee's freedom of movement in the 
marketplace; the no-hire agreement between Greenbriar and Dove 
does not. 
¶53 Furthermore, 
the 
majority's 
evaluation 
of 
the 
necessity of the covenant appears to rest entirely on its 
conclusion that it is unreasonable.  This is circular.  The 
necessity (or lack thereof) of the covenant is one measure of 
its reasonableness under the test.  The majority is basically 
saying 
that 
the 
covenant 
is 
unnecessary 
because 
it 
is 
unreasonable, therefore it is unreasonable because it is 
unnecessary. 
¶54  The majority also concludes that the no-hire provision 
contains 
an 
"arguably . . . unreasonable 
territorial 
restriction," which is "potentially problematic."  Majority op., 
¶19.  First of all, there are "arguable" or "potentially 
problematic" issues in every case; our job is to resolve the 
argument or problem one way or the other. 
¶55 More importantly, the no-hire provision does not 
contain a territorial restriction at all; it only prohibits Dove 
from hiring Greenbriar's employees without consent and without 
paying a fee.  That Greenbriar's contracts with its other 
customers contained similar no-hire clauses does not operate to 
create a "territorial restriction" for purposes of Wis. Stat. 
§ 103.465, and certainly does not amount to an "unreasonable 
territorial restriction," considering that Greenbriar's area 
market share for therapists was only 12 percent. 
No.  01-0863-FT.dss 
 
8 
 
¶56 On this point, the majority also notes the obvious——
that nursing homes would prefer to hire therapists without 
having to pay a 50 percent premium——and then concludes that this 
puts Greenbriar's employees "at a disadvantage in obtaining 
employment," which apparently is unacceptable.  Majority op., 
¶19.  By this measure, all no-hires and non-competes are per se 
unreasonable, because they always result in some competitive 
disadvantage to the relevant employees.  The real question is, 
how much is too much?  The majority does not say. 
¶57  The majority also concludes that the no-hire provision 
is "harsh and oppressive to Greenbriar's employees and is 
contrary to public policy" because it was entered into without 
the employees' knowledge and consent and without consideration 
to the employees.  Majority op., ¶20.  Is the majority actually 
suggesting that an employee——every employee——has a veto, and a 
right to consideration, whenever his or her employer negotiates 
a contract with a customer that includes a no-hire clause?  Why 
should Dove, which freely agreed to pay the 50 percent premium 
if it hired a Greenbriar employee, be entitled to avoid its 
contractual obligations by asserting that someone else has 
sustained a purely hypothetical injury? 
¶58 The majority's reliance on Cheek v. Prudential Ins. 
Co. of America, 192 S.W. 387 (Mo. 1916), aff'd Prudential Ins. 
Co. v. Cheek, 259 U.S. 530 (1922) is strained.  The defendant 
insurance companies in that case had a complete monopoly——100 
percent market share——and agreed among themselves not to hire 
each other's employees.  An outright prohibition of hiring 
No.  01-0863-FT.dss 
 
9 
 
across an entire market that operates, therefore, as a complete 
deprivation of the right to seek employment is a far cry from 
the facts of this case, in which hiring is merely burdened by a 
fee and 88 percent of the market remains completely open.   
¶59  The majority's analysis of this case essentially makes 
all no-hire provisions unenforceable.9  The majority opinion 
therefore deprives companies in this state of the ability to 
contractually protect their investments in employee recruitment 
and training against poaching by their customers. 
¶60  To the extent that Dove relies on broader arguments 
under Wis. Stat. § 133.01, which the majority does not address, 
its attempt to invalidate the no-hire provision must also fail.  
Wisconsin Statute § 133.01, Wisconsin's equivalent of section 1 
of the Sherman Antitrust Act, declares contracts in restraint of 
trade illegal, and has been interpreted consistently with the 
"rule of reason" in federal antitrust law, to prohibit only 
unreasonable restraints of trade.  Independent Milk Producers 
Co-op v. Stoffel, 102 Wis. 2d 1, 7, 298 N.W.2d 102 (Ct. App. 
1980).  Reasonableness is determined by reference to the purpose 
                                                 
9 The majority has rewritten Wis. Stat. § 103.465 so that it 
now reads: 
A covenant by an assistant, servant or agent not to compete 
with his or her employer or principal during the term of the 
employment 
or 
agency, 
or 
after 
the 
termination 
of 
that 
employment or agency, within a specified territory and during a 
specified 
time 
is 
lawful 
and 
enforceable 
only 
if 
the 
restrictions imposed are reasonably necessary for the protection 
of the employer or principal.  Any covenant, described in this 
subsection, imposing an unreasonable restraint is illegal, void 
and unenforceable even as to any part of the covenant or 
performance that would be a reasonable restraint. 
No.  01-0863-FT.dss 
 
10 
 
of the restraint, the market power of the party who benefits 
from the restraint, and the anticompetitive effect of the 
restraint.  Grams v. Boss, 97 Wis. 2d 332, 348, 294 N.W.2d 473 
(1980). 
¶61 In Wisconsin, non-compete agreements between businesses 
(as contrasted with employer/employee non-competes) have been 
evaluated on the basis of a three-part test for reasonableness: 
1) is the agreement reasonably necessary for the protection of 
the beneficiary; 2) is it reasonable as between the parties, 
considering the time, space, purpose and scope of the agreement; 
and 3) is it specially injurious to the public? Reiman Assoc. v. 
R/A Adver., Inc., 102 Wis. 2d 305, 309, 306 N.W.2d 292 (Ct. App. 
1981). A no-hire agreement between a supplier and its customers 
is not technically the equivalent of a non-compete agreement 
between businesses, but it is analogous.  There is some obvious 
overlap between this test and the test for a valid employee non-
compete covenant under Wis. Stat. § 103.465, which I have 
already addressed at some length above. 
¶62  While it is conceivable that some no-hire agreements 
would fail this test, I am satisfied that the no-hire provision 
in the contract between 
Greenbriar 
and Dove 
is not an 
unreasonable restraint of trade under Wis. Stat. § 133.01. It is 
reasonably 
necessary 
for 
the 
protection 
of 
Greenbriar's 
investment in the recruitment and training of its employees; 
otherwise, 
Greenbriar becomes 
an 
involuntary 
training and 
recruitment agency for Dove.  Because it is intended to protect 
Greenbriar's investment in this regard, the agreement is also 
No.  01-0863-FT.dss 
 
11 
 
reasonable in purpose.  It is also reasonable in time, in that 
it extends only one year after termination of the agreement.  It 
is reasonable in scope, because it binds only Dove and does not 
entirely prohibit the hiring of Greenbriar's employees, but, 
rather, imposes only the requirements of consent and payment of 
a reasonable fee.  And, finally, it is not especially injurious 
to the public, as there is no evidence that it has an 
anticompetitive effect on the market for therapists in the Eau 
Claire/Chippewa Falls area.  Reasonableness as to space, which 
concerns territorial restrictions, is not at issue here, for the 
reasons noted in ¶20.  See Reimann, 102 Wis. 2d at 312 n.6. 
¶63  In short, neither Wis. Stat. § 103.465 nor Wis. Stat. 
§ 133.01 provides refuge for Dove in this case.  Wisconsin 
Statute § 103.465 does not apply, and the no-hire provision is 
not contrary to the public policy expressed in that statute.  
Furthermore, the no-hire provision is not unenforceable as an 
unreasonable restraint of trade under Wis. Stat. § 133.01.  
Accordingly, the no-hire provision is enforceable.  "Contract 
law rests on obligations imposed by bargain," and its integrity 
depends in no small part on the willingness of courts "to 
protect 
the 
expectancy 
interests 
of 
parties 
to 
private 
bargained-for agreements" and "hold commercial parties to their 
promises."  Daanen & Janssen, Inc. v. Cedarapids, Inc., 216 Wis. 
2d 395, 404, 573 N.W.2d 852 (1998).  I would reverse the court 
of appeals, and reinstate the judgment of the circuit court. 
¶64 I am authorized to state that Justice ANN WALSH 
BRADLEY joins this dissent.   
No.  01-0863-FT.dss 
 
12 
 
 
 
 
No.  01-0863-FT.dss 
 
 
 
1