Title: H&M Commerical Driver Leasing, Inc. v. Fox Valley Containers, Inc.

State: illinois

Issuer: Illinois Supreme Court

Document:

Docket No. 96057-Agenda 16-November 2003.
H&M COMMERCIAL DRIVER LEASING, INC., Appellee, v. FOX 							VALLEY CONTAINERS, INC., Appellant.
Opinion filed February 20, 2004.
 
	JUSTICE FREEMAN delivered the opinion of the court:
	Plaintiff, H&M Commercial Driver Leasing, Inc. (H&M), filed an
action for breach of contract against defendant, Fox Valley Containers,
Inc. (Fox Valley), in the circuit court of Cook County. The circuit court
granted H&M judgment on the pleadings (735 ILCS 5/2-615(e) (West
2000)), and the appellate court affirmed (No. 1-01-2831 (unpublished
order under Supreme Court Rule 23)). We granted Fox Valley leave to
appeal (177 Ill. 2d R. 315(a)) and now affirm.
Background
	H&M is an Illinois corporation in the business of leasing truck drivers
and related personnel. On January 10, 2000, H&M and Fox Valley
entered into an agreement in which H&M agreed to furnish Fox Valley
licensed truck drivers, and Fox Valley agreed to pay H&M on a per-hour
basis for the drivers. The parties' agreement contains the following
provision (hereinafter referred to as paragraph 13), which is the genesis
of this lawsuit:
		"[Fox Valley] agrees that it will not hire any of the drivers and
other personnel that [H&M] furnishes to [Fox Valley] for a
period one (1) year from the termination date of this Agreement.
However, [Fox Valley] may hire any driver and other personnel
whose employment with [H&M] terminated at least one year
prior to being hired by [Fox Valley]. In the event that [Fox
Valley] does hire any driver or other personnel [sic] will be in
violation of the terms of this Agreement, then [Fox Valley] shall
pay to [H&M] for each driver and other personnel hired in
violation of this agreement $15,000 as liquidated damages, plus
all costs and expenses, including attorney's fees, incurred by
[H&M] in enforcing the provisions of this Agreement, including
injunctive relief. [H&M] and [Fox Valley] agree and
acknowledge that the liquidated damages set forth in this
paragraph are a reasonable estimate of the damages which
would result from a breach of this paragraph, that actual
damages from such a breach would be difficult to ascertain, and
that the liquidated damages are an alternative to performance and
not a penalty."
The parties' contract length was indefinite until cancelled by either party
upon written notice.
	During the course of the agreement, H&M leased to Fox Valley a
truck driver named James Booker. On February 11, 2000, Fox Valley
hired Booker as a truck driver. After learning of Booker's hiring by Fox
Valley, H&M filed a complaint for breach of contract in the circuit court.
H&M alleged that by hiring Booker, Fox Valley breached paragraph 13
of the parties' agreement, under which Fox Valley agreed not to hire any
of the drivers provided by H&M under the contract for one year following
the termination of the contract. H&M sought damages as provided in
paragraph 13.
	Fox Valley moved to dismiss the complaint pursuant to section
2-619 of the Code of Civil Procedure (735 ILCS 5/2-619 (West
2000)). In the motion, Fox Valley pointed out that Booker did not have
a written employment agreement with H&M, Booker terminated his
employment with H&M of his own accord, and Booker solicited Fox
Valley for new employment. In an affidavit attached to H&M's motion,
Booker averred that his motivation for leaving H&M was the lack of
regular work. Fox Valley maintained that H&M's complaint failed to state
a cause of action because paragraph 13 was unenforceable as a matter of
law due to the fact that it adversely affected Booker's right to free
employment.
	The circuit court denied Fox Valley's motion. Fox Valley then
requested certification of the question to the appellate court pursuant to
Supreme Court Rule 308. The circuit court denied the request.
	In its answer, Fox Valley admitted all relevant facts contained in
H&M's complaint. However, Fox Valley denied that it committed any
breach of contract. Fox Valley contended that its hiring of Booker did not
violate paragraph 13 of the agreement because the paragraph is "violative
of public policy as it is a restraint of trade on a third party."
	H&M thereafter moved for judgment of the pleadings. The circuit
court granted the motion and entered judgment for H&M in the amount
of $18,747, inclusive of attorney fees and costs.
	On appeal, Fox Valley argued that the circuit court erred in finding
a breach of contract because the written agreement unreasonably
restricted free trade and was thus unenforceable as a matter of public
policy. Fox Valley noted that Booker had terminated his employment with
H&M of his own accord and had solicited Fox Valley for employment.
The appellate court rejected these arguments, holding that paragraph 13
does not violate public policy because it did not unduly place restraints on
free trade. Rather, paragraph 13 merely placed restrictions on Fox
Valley's ability to hire drivers from H&M, restrictions to which Fox Valley
had agreed.
Analysis
	Fox Valley contends that paragraph 13 acts as a restrictive covenant
on third parties without their consent and is thus unenforceable as a matter
of public policy. As a result, Fox Valley argues that the circuit court's
entry of judgment on the pleadings, as affirmed by the appellate court, was
in error.
	Judgment on the pleadings is properly entered in instances where no
genuine issue of material fact exists and the movant is entitled to judgment
as a matter of law. M.A.K. v. Rush-Presbyterian-St. Luke's Medical
Center, 198 Ill. 2d 249, 255 (2001). Only those facts apparent from the
face of the pleadings, matters subject to judicial notice, and judicial
admissions in the record may be considered. Moreover all well-pleaded
facts and all reasonable inferences from those facts are taken as true.
M.A.K., 198 Ill. 2d  at 255. On appeal, the reviewing court must
determine whether any issues of material fact exist and, if not, whether the
movant was, in fact, entitled to judgment as a matter of law. M.A.K., 198 Ill. 2d  at 255. The standard of review is de novo. M.A.K., 198 Ill. 2d  at
255.
	Traditionally, this court, in keeping with the principle of freedom of
contract, has been reluctant to invoke its power to declare a private
contract void as contrary to public policy. We have previously recognized
that, in considering the question,
		"it should be remembered that it is to the interests of the public
that persons should not be unnecessarily restricted in their
freedom to make their own contracts. Agreements are not held
to be void, as being contrary to public policy, unless they be
clearly contrary to what the constitution, the statutes or the
decisions of the courts have declared to be the public policy or
unless they be manifestly injurious to the public welfare."
Schumann-Heink v. Folsom, 328 Ill. 321, 330 (1927).
Whether an agreement is contrary to public policy depends on the
particular facts and circumstances of the case. O'Hara v. Ahlgren,
Blumenfeld & Kempster, 127 Ill. 2d 333, 341-42 (1989).
	Fox Valley submits that this case is controlled by Szabo Food
Service, Inc. v. County of Cook, 160 Ill. App. 3d 845 (1987). There,
the plaintiff, Szabo, a food management service, contracted with the
defendant, Cook County, to provide it with food managers for the county
jail. The contract contained a provision in which the county agreed that it
would not hire any of Szabo's employees for six months after the
termination of the contract and would not permit former Szabo employees
to be employed within the county. After the contract was terminated, the
county entered into a contract with one of Szabo's rivals, Canteen.
Canteen had hired four workers who had previously worked for Szabo,
and those four ultimately were assigned to the county jail food operations.
Szabo filed suit against the county for breach of contract and sought an
injunction to prevent Canteen from employing the four workers in
question. The circuit court denied injunctive relief and found the provision
to be unenforceable. Szabo, 160 Ill. App. 3d at 846-47. The appellate
court affirmed the decision, ruling that the clause was unenforceable
because its effect was to restrict the right of Canteen, a corporation not a
party to the agreement, to hire former managers of the plaintiff to work for
its operations at the jail. Szabo, 160 Ill. App. 3d at 848-49. The court
held that the provision created "an unreasonable restriction on the freedom
of contract of members of the public (i.e., of persons who are not parties
to the contract containing the covenant), and therefore the covenant is not
enforceable." Szabo, 160 Ill. App. 3d at 849.
	A careful review of Szabo reveals the case is not squarely on point
with the case at bar. The contract provision there essentially placed
restrictions on the hiring practices of a third company, Canteen, which was
not a party to the agreement. In this case, Fox Valley is a party to the
contract which contained the provision restricting its ability to hire former
H&M employees.
	We note that in distinguishing Szabo on similar grounds and in
upholding the enforceability of paragraph 13, the appellate court in this
case relied upon American Food Management, Inc. v. Henson, 105 Ill.
App. 3d 141 (1982). There, the plaintiff, American Food, was a
corporation which provided food services to facilities such as college
dormitories. American Food entered into a contract with the owner of
Stevenson Hall in Carbondale, Illinois. The parties agreed that Stevenson
would not hire American Food employees for a period of one year after
the termination of the contract. Meanwhile, American Food employed
Wesley Henson while he was a student in Missouri and ultimately offered
him a permanent job. The new job required Henson to relocate to
Kansas. Henson accepted American Food's verbal offer and relocated.
One week after his move, he received a written contract of employment
from American Food. The written contract contained a clause which
provided that Henson, upon termination of his job, would not work for
any American Food competitor within a 25-mile radius of any dormitory
unit at which he had worked for American Food. Henson signed the
agreement. Eventually, Henson was transferred to Wilson Hall in
Carbondale, Illinois. Henson later quit American Food's employ and
found work at Stevenson Hall. American Food sued both Henson and the
owner of Stevenson Hall on theories of breach of contract. The circuit
court ruled in favor of American Food against both Henson and the owner
of Stevenson. American Food Management, 105 Ill. App. 3d at 142-43.
	The appellate court reversed the finding for American Food with
respect to Henson. The court held that the 25-mile restrictive covenant
between the two constituted a contract of adhesion because Henson was
never told about the provision prior to his relocation to Kansas. American
Food Management, 105 Ill. App. 3d at 146-47. Relevant to our
discussion here is the court's treatment of a secondary issue, i.e., the
validity of the contractual provision between American Food and the
owner of Stevenson Hall. The appellate court first noted that the validity
of the provision was never challenged in the circuit court and that, on
appeal, the question was raised very vaguely. Nevertheless, the court
stated that
		"[e]ven if the point were not waived for review, having been
raised for the first time in this court, the suggestion of ambiguity
is not well taken. Wesley Henson being one of the 'management
employees of American Food [sic] Inc.' at the time the contract
expired, there is no doubt as to its application to him." American
Food Management, 105 Ill. App. 3d at 147.
The court upheld the circuit court's order enjoining Stevenson Hall from
employing Henson for one year. American Food Management, 105 Ill.
App. 3d at 147-48.
	As noted, the appellate court relied upon American Food
Management in this case. We recognize that the pertinent facts in
American Food Management are similar to those at issue here.
However, we are troubled by the lack of any detailed analysis in
American Food Management of the public policy questions these types
of cases raise. Indeed, due to the defendant's waiver of the issue, the
court in American Food Management merely applied the provision
without any discussion whatsoever of its validity. For that reason, we do
not find the case particularly helpful in answering the public policy
questions that are before us.(1)
	Although this issue has not been squarely addressed by Illinois courts,
the matter has been examined by courts in other jurisdictions. For
example, in Heyde Cos. v. Dove Healthcare, 258 Wis. 2d 28, 654 N.W.2d 830 (2002), the Wisconsin Supreme Court 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. The case centered on an agreement
between Greenbriar Rehabilitation, which furnished physical therapists to
nursing home facilities, and Dove Healthcare, a health-care provider that
operated nursing homes. The agreement provided that Greenbriar was to
place physical therapists at Dove's Eau Claire facility. The agreement also
contained a provision by which Dove agreed not to hire Greenbriar
therapists as employees during the duration of the contract and for a
period of one year thereafter. Dove eventually terminated the agreement
and shortly afterward hired one current and three former Greenbriar
employees. Greenbriar filed suit, seeking damages for the breach of
contract. Heyde, 258 Wis. 2d at 32, 654 N.W.2d  at 832.
	In assessing the enforceability of the provision, the court first applied
a Wisconsin statute which concerned the enforcement of any unreasonable
restrictive covenant to the provision at issue. The court found the statute
to be applicable because the court construed the provision to be an
indirect restrictive covenant. The court stated:
			"[I]t 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 *** 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. *** This court has *** recognized the necessity of
consideration in referencing an employee's decision to sign a
covenant not to compete that he or she deems unreasonable."
Heyde, 258 Wis. 2d at 40, 654 N.W.2d  at 836.
The court further noted that Greenbriar could protect its interest in
maintaining its employees by utilizing a valid restrictive covenant in
compliance with Wisconsin laws. Wisconsin law required that employees
know they are subject to a restrictive covenant and that they consent to
such a provision. For this same reason, the court also found the provision
to be unenforceable under the common law, notwithstanding the
applicability of the Wisconsin statute concerning restrictive covenants.
Heyde, 258 Wis. 2d at 42-44, 654 N.W.2d  at 837-38.
	In contrast to Heyde, the Virginia Supreme Court, in Therapy
Services, Inc. v. Crystal City Nursing Center, Inc., 239 Va. 385, 389 S.E.2d 710 (1990), upheld the validity of a similar contractual provision.
The facts in Crystal City are essentially the same as in the Heyde case,
i.e., the provider of physical therapists seeking to prevent nursing home
customers from hiring provider's employees. Crystal City, 239 Va. at
386-87, 389 S.E.2d  at 711. The nursing home contended that the
provision was unenforceable because it violated public policy in that it
affected the rights of third parties without their consent or knowledge.
Crystal City, 289 Va. at 387, 389 S.E.2d  at 711. The court began its
analysis by noting that the provision at issue was neither a covenant not to
compete nor a restrictive covenant between an employer and employee.
Rather, the court ruled that the provision represents an agreement where
"one party agrees to forego the ability to hire certain people who are not
parties to the contract. As such, it is a contract in restraint of trade and will
be held void as against public policy if it is unreasonable as between the
parties or is injurious to the public." Crystal City, 239 Va. at 388, 389 S.E.2d  at 711. The court determined that the restraint was reasonable
because it afforded fair protection to the interests of the party favoring it
and that it was not so broad as to interfere with the interests of the public.
The court held that the provider had a legitimate interest in maintaining
professional personnel in its employ-without such a clause the provider
would become an " 'involuntary and unpaid employment agency.' "
Crystal City, 239 Va. at 388, 389 S.E.2d  at 712. With respect to the
interests of the public, the court addressed the employees' lack of
knowledge of the clause in depth:
			"The right to earn a livelihood is embraced in the constitutional
concept of 'liberty.' [Citation.] However, this right is
conceptually and practically distinct from a claim of a right to
specific employment. Neither [the nursing home] nor the trial
court has cited any authority for the proposition that individuals
have a right to employment by an employer of their choice or by
any specific employers. The evidence indicated that in the
Northern Virginia area, therapists were in low supply and in high
demand and, thus, should they choose to leave Therapy
Services' employ, they could secure like positions in the area.
			Similarly, there was no adverse impact on the interest of the
public at large. The availability of therapists' services was not
diminshed since the affected therapists were not precluded from
working in Northern Virginia or any other area. Under these
circumstances, we cannot conclude that [the provision] deprived
the affected therapists of the 'right to seek a livelihood' or that it
interfered 'with the interest of the public.' [Citation.]" Crystal
City, 239 Va. at 389, 389 S.E.2d  at 712.
As a result, the court upheld the validity of the provision.
	After considering both opinions, we believe the Virginia Supreme
Court provides the most guidance with respect to the case at bar. As an
initial matter, we agree with that court that paragraph 13 is neither a
covenant not to compete nor a restrictive covenant between employer and
employee.(2) This is not a case where the employee is arguing that he or she
has been foreclosed from employment. In our view, the provision at issue
restricted one employer's ability to hire former employees of the other
employer. Thus, as the Virginia Supreme Court recognized, the contract
provision acts as a restraint on trade. This court has held that "in
determining whether a restraint [on trade] is reasonable it is necessary to
consider whether enforcement will be injurious to the public or cause
undue hardship to the promisor, and whether the restraint imposed is
greater than is necessary to protect the promisee." Bauer v. Sawyer, 8 Ill. 2d 351, 355 (1956).
	H&M argues that paragraph 13 is reasonable, as it protects its sole
business asset, its drivers, from being hired away by its customers. If
customers could hire H&M's drivers on a permanent basis, then they
would no longer need H&M's services. We agree that this is a legitimate
interest and that paragraph 13 affords fair protection to that interest. It is
important to note that, under the provision, H&M employees are not
restricted from seeking employment as drivers with any employer other
than Fox Valley. Fox Valley is not restricted from hiring all H&M
employees, just those who had been provided to Fox Valley from H&M.
Moreover, Fox Valley is not, under the provision, completely barred from
employing H&M's former employees; rather, Fox Valley must pay H&M
the liquidated damages to which it agreed, if it does so within one year of
the termination of the contract. We do not believe this restriction is
unreasonable. We agree with the Virginia Supreme Court that to conclude
otherwise would render H&M nothing more than " 'an involuntary and
unpaid employment agency.' " Crystal City, 239 Va. at 388, 389 S.E.2d 
at 712. Paragraph 13 prevents clients like Fox Valley from appropriating
the value H&M created in the placement of valued truck drivers. In this
case, it appears H&M did its job so well that Fox Valley wanted to offer
direct employment to driver Booker.
	With respect to the interests of the public, we do not see an adverse
impact on those interests on this record. Nothing in the record suggests
that the availability of truck drivers was diminished because the employees
were precluded from working in the area. More importantly, Fox Valley
did not allege in its answer any facts which so suggest. H&M employees
are not unreasonably restricted or otherwise hurt by the no-hire clause in
this contract. We acknowledge that the existence of paragraph 13 renders
former H&M employees who were placed with Fox Valley potentially less
desirable hires for Fox Valley because of the liquidated damages that
would result from such a hire. However, such potential harm is, on this
record, merely speculative. Booker was, in fact, hired by Fox Valley
despite the existence of the clause. We are reluctant to deem a contractual
provision an unreasonable or excessive restraint of trade on the basis of
mere speculation of harm.
	In light of the above, we hold that paragraph 13 was not invalid as
against public policy. Accordingly, the circuit court did not err in granting
H&M's judgment on the pleadings, as there were no questions of material
fact raised by the pleadings.
Conclusion

	The circuit court correctly entered judgment for H&M. We therefore
affirm the judgment of the appellate court.
Appellate court judgment affirmed.
	JUSTICE THOMAS, specially concurring:
	Unlike my colleagues in the majority, I find the Wisconsin Supreme
Court's decision in Heyde Cos. v. Dove Healthcare, LLC, 258 Wis. 2d
28, 654 N.W.2d 830 (2002), to be a better reasoned decision than the
Virginia Supreme Court's decision in Therapy Services, Inc. v. Crystal
City Nursing Center, Inc., 239 Va. 385, 389 S.E.2d 710 (1990).
Nevertheless, because of an important distinction between Heyde and the
case before us, I feel constrained to concur in the majority's judgment.
	Heyde held that 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. It
was a matter of record in Heyde that the employees did not know of the
no-hire provision:
			"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." Heyde, 258 Wis.
2d at 33, 654 N.W.2d  at 832.
Here, by contrast, nothing in the record indicates that Booker was
unaware of the no-hire provision. On appeal, Fox Valley argues that the
provision was "undisclosed." However, as H&M correctly points out, Fox
Valley did not make this assertion in its answer, nor did Booker make the
assertion in his affidavit. Thus, there is nothing in the record indicating that
Booker was unaware of the no-hire provision.
	In my opinion, if the no-hire provision was undisclosed, then the
provision would be void as against public policy. The majority is correct
that a no-hire provision is not a restrictive covenant. However, as the
Heyde court pointed out, no-hire provisions have the same effect on
employees as restrictive covenants. Heyde, 258 Wis. 2d at 36-37, 654 N.W.2d  at 834. Thus, employees should be told of such a provision when
they begin their employment. Two employers should not be able to
contract away an employee's future employment opportunities without the
employee's knowledge or consent.
	What Booker did here is similar to what millions of Americans do.
He took a less than ideal job, and through that job made contacts which
allowed him to take a better job. When an employee enters into this
situation, he or she should be told of restrictions on future employment
opportunities. In this regard, I share the concerns of the concurring justice
in Heyde, who wrote the following:
			"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.
			I agree with the court of appeals: 'The no-hire provision
violates public policy by restricting Greenbriar therapists the right
[sic] to freely sell their skills in the labor market. Without signing
any agreement or even being given notice ... current and former
Greenbriar therapists are restricted from being employed by
these facilities, unless Greenbriar gives consent and unless the
facilities are willing to pay the fee.'
			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' 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?' The law of this State answers this question:
freedom to contract, like other freedoms, has limitations.
			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
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." (Emphasis omitted.)
Heyde, 258 Wis. 2d at 45-47, 654 N.W.2d  at 838-39
(Abrahamson, C.J., concurring).
	Although it is true that Booker was in fact hired by Fox Valley, the
reality is that liquidated damages provisions such as the one at issue here
will make it more difficult for affected employees to obtain new
employment. As the Heyde court held, "[i]t 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." Heyde,
258 Wis. 2d at 40, 654 N.W.2d  at 836.
	The majority is correct that H&M has a legitimate business interest
in not being simply an employment agency for its customers, and that the
no-hire provision protects H&M's sole business asset. Slip op. at 9-10.
Neither the majority nor H&M, however, has explained why H&M could
not accomplish the same thing by entering into the agreement with its
employees. This way, H&M's business interests would be protected and
the employees would not have their future employment opportunities
contracted away by others. At the very least, however, I believe that
employees should be told of such no-hire provisions when they accept
employment. Because in this case it is not a matter of record that the
provision was undisclosed, I concur in the majority's judgment.
	JUSTICE RARICK, dissenting:
	The law has changed since Schumann-Heink v. Folsom, 328 Ill. 321 (1927), the case cited by the majority at the outset of its substantive
analysis. Under Illinois law, contracts in general restraint of trade are now
ordinarily held to be void Canfield v. Spear, 44 Ill. 2d 49, 50 (1969);
Health Professionals, Ltd. v. Johnson, 339 Ill. App. 3d 1021, 1029
(2003). Exceptions exist in the employment context. Under certain
circumstances, an employer may impose contractual restrictions on where
and when an employee may work after he leaves the employer's payroll.
Such restrictive covenants, however, are not favored. They must be
strictly construed and will be enforced only if their impact on the parties
to the agreement and the public is reasonable. See Szabo Food Service,
Inc. v. County of Cook, 160 Ill. App. 3d 845, 848 (1987); Marwaha
v. Woodridge Clinic, S.C., 339 Ill. App. 3d 291, 294 (2003).
	The no-hire provision at issue in this case is tantamount to a
restrictive employment covenant, and its validity must be judged by the
same standards. To assess whether covenants restricting employment
should be upheld, the courts have fashioned specific criteria. The time limit
and geographic scope of the restriction must be reasonable, trade secrets
or confidential information must be involved, and the restriction must be
reasonably necessary for the protection of a legitimate business interest.
Image Supplies, Inc. v. Hilmert, 71 Ill. App. 3d 710, 712-13 (1979).
	The foregoing conditions are sometimes satisfied in cases involving
the performance of professional services or where a person's employment
has enabled him to obtain technical or trade information or customer lists
to which he would not otherwise have had access. See Restatement
(Second) of Contracts §188, Comment g, at 45-46 (1981). The situation
here, however, does not involve such circumstances. The affected
employees in this case are truck drivers who possess no unique
characteristics that differentiate them from the general pool of truck
drivers. As far as we can tell, they acquire no specialized skill or training
from plaintiff and possess no trade secrets, customer lists or confidential
business information belonging to plaintiff.
	There is no indication that the supply of drivers is limited. If one of the
drivers leaves plaintiff's employ, plaintiff can therefore simply hire another
to replace him. For plaintiff, the only consequence of losing one of its
drivers to a company like defendant's is that plaintiff will no longer be able
to profit from that driver's labor. The wages earned by the driver will now
all be kept by the driver. Plaintiff may consider this unfair, considering that
it was responsible for making the initial arrangements that enabled the
driver to work for defendant. The free market, however, provides plaintiff
with a complete remedy. If it does not wish its drivers to defect to its
clients, it can do what other private employers must do to retain
employees: it can pay them more. Judicial remedies are unnecessary and
inappropriate.
	The majority dismisses the harmful effects of plaintiff's no-hire
agreement as "merely speculative." I doubt that view would be shared by
anyone in the trucking industry. Defendant may have hired one of plaintiff's
former drivers, but now that our court has upheld the $15,000 liquidated
damages provision in the no-hire agreement, neither defendant nor any
other client of plaintiff's will ever hire another.
	The United States Department of Labor, Bureau of Labor Statistics,
National Compensation Survey, issued in June of 2003, reports at page
9 that the mean hourly earnings of truck drivers is $14.20 and that the
mean number of weekly hours worked is 40.2. Those figures work out to
$29,683.68 per year. The $15,000 liquidated damages provision is
therefore equivalent to more than half a year's wages for the average
driver. Given that plaintiff's drivers are not claimed to possess any special
knowledge or skill and that qualified drivers are not alleged to be in short
supply, no rational successor employer would risk incurring such a
penalty. That is not speculation. It is basic dollars and cents.
	Although defendant apparently elected not to challenge the validity
of the liquidated damages clause when it appealed to the appellate court,
the precedential effect of today's opinion and the interests of maintaining
a sound and consistent body of case law suggest that we put aside
considerations of waiver and address the issue on the merits. The test for
determining whether a liquidated damages clause is valid as such or void
as a penalty is stated in section 356 of the Restatement (Second) of
Contracts (1981):
			"(1) Damages for breach by either party may be liquidated in
the agreement but only at an amount that is reasonable in the light
of the anticipated or actual loss caused by the breach and the
difficulties of proof of loss. A term fixing unreasonably large
liquidated damages is unenforceable on grounds of public policy
as a penalty."
See Penske Truck Leasing Co. v. Chemetco, Inc., 311 Ill. App. 3d
447, 454 (2000); Pav-Saver Corp. v. Vasso Corp., 143 Ill. App. 3d
1013, 1018-19 (1986).
	In H&M Driver Leasing Services, Unlimited, Inc. v. Champion
International Corp., 181 Ill. App. 3d 28, 31 (1989), the appellate court
considered a liquidated damages provision which plaintiff attempted to
enforce under circumstances directly analogous to those present here. It
determined that the provision constituted an unenforceable penalty and
that plaintiff was limited to recovering only the actual damages it could
prove.
	 The provision struck down in H&M Driver Leasing Services,
Unlimited, Inc. v. Champion International Corporation called for a
payment of $10,000. Given the similarities between that case and this one,
it is difficult for me to see how we can justify upholding the liquidated
damages provision here, which is 50% greater. The contract in H&M
Driver Leasing Services, Unlimited, Inc. v. Champion International
Corp. did allow plaintiff to recover actual damages as well as liquidated
damages. Here liquidated damages replace actual damages. In my view,
however, the distinction is not dispositive. Although the availability of
actual damages in addition to liquidated damages highlights the penal
nature of the liquidated damages provision struck down in H&M Driver
Leasing Services, Unlimited, Inc. v. Champion International Corp.,
that provision could not have survived scrutiny under the governing
standards even without the actual damages remedy.
	The liquidated damages remedy plaintiff attempted to enforce in
H&M Driver Leasing Services, Unlimited, Inc. v. Champion
International Corp. suffered from two fundamental problems. Fist, it
bore no discernible relationship to any anticipated or actual loss incurred
by plaintiff. Second, there is nothing in the case, as far as I can tell,
suggesting that proof of plaintiff's actual loss would have been difficult.
The same is true of the present case.
	When assessing whether the amount fixed as liquidated damages
reasonably approximates anticipated losses, courts look to when the
parties made the contract, not to when the contract was breached.
Restatement (Second) of Contracts §356, Comment b, at 158 (1981). At
the time the parties made this contract, they could not possibly have
anticipated that a decision by defendant to hire one of plaintiff's drivers
would have inflicted $15,000 worth of damages on plaintiff's business.
	 In terms of anticipated or actual loss, only two categories of
damages might be relevant here. One is lost revenues. The other is the
expense of training drivers and placing them with clients. With respect to
lost revenues, the scant materials before us suggest that plaintiff's profits
were derived from the differential between what it charged defendant for
a driver's services and what it actually paid the driver. Considering the
median earnings of truck drivers, generating $15,000 from a driver's labor
would have taken plaintiff time. Given the sporadic and irregular work
hours this driver claims he was assigned, it seems likely that it would have
taken considerable time. Plaintiff could therefore claim expected lost
revenues of $15,000 only if it had a reasonable expectation that this driver
or a similarly compensated replacement driver would continue working for
it for a sufficiently long period. The problem is plaintiff had no reasonable
expectation that the driver would continue to work for it at all. Plaintiff
likewise had no reasonable expectation that defendant would continue to
use this driver or a replacement driver supplied by plaintiff. The driver was
an at-will employee. He was free to quit at any time, and defendant was
free to hire anyone it wanted to take his place. Defendant had no
obligation to continue to use drivers provided by plaintiff. The notion that
hiring the driver away from plaintiff would cause plaintiff to lose a $15,000
revenue stream is therefore entirely speculative.
	With respect to lost training and placement expenses, plaintiff's claim
is equally tenuous. At the time the driver left plaintiff to work for
defendant, he had only been on plaintiff's payroll for one month. There is
nothing before us suggesting that plaintiff expended any resources during
that time to train or equip him. Although plaintiff presumably processed
some paperwork in connection with the driver's employment, it makes no
claim that it was not paid in full by defendant for the driver's services.
	Assuming that plaintiff acted rationally, the differential between what
it paid the driver and what it charged defendant for his services would
have to be sufficient to enable plaintiff to recover its costs as they were
incurred or within a short time thereafter. Rapid, if not immediate, cost
recovery was necessary because plaintiff had no assurance that the driver
would remain in its employ. Again, he was an at-will employees, free to
quit at any time and for any reason. Whether he worked a year, a month,
or even just a day, neither he nor defendant had any obligation to
reimburse plaintiff for any of its overhead expenses. Accordingly, unless
plaintiff recouped its expenses quickly, it risked not being able to recoup
those expenses at all. I see no possible reason why plaintiff would have
taken such a risk. To the contrary, it seems likely to me that plaintiff had
already recovered all of its expenses attributable to the driver by the time
the driver went to work for defendant.
	Wholly aside from those considerations, this is not a situation where
fixing liquidated damages is appropriate on the grounds that proof of
actual loss would be difficult. Plaintiff has not explained and I cannot see
why proof of actual damages would be any more troublesome here than
in any other contract action. If plaintiff did invest resources to train the
driver hired by defendant, that is something that can surely be quantified.
If it lost a stream of future income, that can surely be quantified as well.
	For the foregoing reasons, I would hold that the liquidated damages
provision in the no-hire agreement cannot be sustained under Illinois law.
"The central objective behind the system of contract remedies is
compensatory, not punitive." Restatement (Second) of Contracts §356,
Comment a, at 157 (1981). This liquidated damages provision is simply
a penalty. "Punishment of a promisor for having broken his promise has
no justification on either economic or other grounds and a term providing
such a penalty is unenforceable on grounds of public policy." Restatement
(Second) of Contracts §356, Comment a, at 157 (1981). Unlike Justice
Thomas, I therefore do not believe that the driver's knowledge of the no-hire provision is dispositive. Whether the driver knew of the provision or
not, the contractual liquidated damages remedy is void.
	Even if I agreed with Justice Thomas' view that the validity of the no-hire provision turned on whether it was disclosed to the driver at the time
he was hired, I could not concur in the result reached by the majority. In
Justice Thomas' view, entry of judgment in favor of plaintiff was
appropriate in this case because nothing in the record shows that the
driver was unaware of the no-hire provision when he accepted the job
from plaintiff. Concern over the absence of evidentiary support for
defendant's position is also reflected in the majority's opinion. What my
colleagues have all failed to take into account is that we are still at the
pleadings stage. There is no evidentiary record.
	The dispute before us arose in the context of a motion for judgment
on the pleadings pursuant to section 2-615 of the Code of Civil
Procedure (735 ILCS 5/2-615 (West 2000)). A section 2-615 motion
for judgment on the pleadings is proper only where there is no genuine
issue of material fact and the movant is entitled to judgment as a matter of
law. M.A.K. v. Rush-Presbyterian-St. Luke's Medical Center, 198 Ill. 2d 249, 255 (2001). When ruling upon a motion for judgment on the
pleadings, a court may consider only (1) facts apparent from the face of
the pleadings, (2) matters subject to judicial notice, and (3) judicial
admissions in the record. Extrinsic evidence may not be considered.
M.A.K., 198 Ill. 2d  at 264.
	Because extrinsic evidence may not be considered, the defendant in
this case cannot be faulted for having failed to produce a more detailed
factual record regarding what the driver knew and when he knew it. What
matters at this stage is that nothing apparent from the face of the pleadings,
no matters subject to judicial notice, and no judicial admissions made by
defendant in the pleadings preclude the possibility that the driver was
unaware of the no-hire clause. That being so, we cannot yet say that there
is no genuine issue of material fact and that plaintiff is entitled to judgment
as a matter of law.
	The majority makes one point I do agree with. Whether an
agreement is contrary to public policy depends on the particular facts and
circumstances of the case. O'Hara v. Ahlgren, Blumenfeld & Kempster,
127 Ill. 2d 333, 341-42 (1989). Defendant had the burden of establishing
a public policy defense, and it should have been given the opportunity to
prove the relevant facts and circumstances. Through its summary ruling in
favor of plaintiff based on the pleadings, the circuit court improperly
deprived defendant of that opportunity. Its judgment should not have been
affirmed by the appellate court. I would therefore reverse the judgments
of the circuit and appellate courts and remand for further proceedings.
1.              
            
        
           
           
          
         
           
         
          
We also find distinguishable Freund v. E.D.&F. Man 
International, Inc., 199 F.3d 382 (7th Cir. 1999), another case upon which 
Fox Valley relies. That case concerned an employment agreement between an 
employer and an employee. A provision in the contract called for the termination 
of two employees (who were not parties to the agreement) upon the termination of 
another employee. The Seventh Circuit Court of Appeals, applying Illinois law, 
held the provision unenforceable because the hardship imposed on the nonsignees, 
being fired, was a much greater hardship than being foreclosed from alternative 
employment. Freund, 199 F.3d  at 385.
2.             
We point out that in Heyde, the majority's conclusion that 
the provision constituted an indirect restrictive covenant met with disagreement 
by both the concurring and dissenting justices. See Heyde, 258 Wis. 2d at 
44-46, 654 N.W.2d  at 838 (Abrahamson, C.J., concurring); Heyde, 258 Wis. 
2d at 47-52, 654 N.W.2d  at 839-41 (Sykes, J., dissenting, joined by Bradley, 
J.).