Court Opinion

ID: 9687733
Source: CourtListenerOpinion
Date Created: 2023-08-24 16:44:55.049041+00
Date Added: 2024-06-11T18:18:30.769524
License: Public Domain

SHIRLEY S. ABRAHAMSON, C.J.
¶ 115. {dissenting). I join Justice Bradley's opinion. I write separately to explain the rationale underlying Wis. Stat. § 103.465. It is important to understand the legislature's reasoning and policy determinations in deciding restrictive covenant cases.
¶ 116. Wisconsin Stat. § 103.465 has placed the onus on employers to draft reasonable restrictive employment covenants. As a result of § 103.465, Wisconsin courts give effect to reasonable covenants but do not rewrite unreasonable covenants to save them.
¶ 117. Courts and commentators have debated the equities of courts' rewriting unreasonable covenants to give effect to their reasonable aspects.1 The *324Wisconsin legislature has opted to require employers to draft reasonable restrictive covenants, not the courts.
¶ 118. The legislature has adopted a balanced approach that accounts for the interests of employers, of employees, and of the public as well. The legislature has determined the equities between employers, employees, and the public in Wis. Stat. § 103.465.
¶ 119. Restrictive employment covenants serve an important business purpose.2
¶ 120. At the same time, an employee has a liberty interest at stake in a restrictive covenant, a "fundamental right... to make choices about his or her own employment."3 Free movement and personal liberty of *325employees are pre-eminent features of employment relations in this state.4 An employer's capacity to draft restrictive covenants constrains the mobility of labor through in terrorem effects on employees and competing employers alike.5 Employees will fear violating even an unreasonable covenant, and businesses that wish to hire employees covered by a restrictive covenant will refrain from doing so to avoid the risk of legal difficulties created by the restrictive covenant.
¶ 121. The third group with an interest in restrictive employment covenants is the public. A restrictive covenant is a restraint of trade.6 The public has an interest in allowing the free movement of labor, encouraging competition rather than diminishing competition by menacing potential competitors, and encouraging the dissemination of ideas, processes, and methods.7
*326¶ 122. Recognizing these conflicting interests, the legislature attempted to "balanceD the employer's business needs and the employee's interest in personal liberty" when enacting Wis. Stat. § 103.465.8 The legislature accommodated the interests of employers by permitting the use of restrictive covenants that are "reasonably necessary for the protection of the employer." Wis. Stat. § 103.465. The legislature protected the interests of employees, however, by mandating that "[a]ny covenant. .. 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. § 103.465.9
¶ 123. The history underlying Wis. Stat. § 103.465 reflects the legislature's judgment that a laissez-faire approach to restrictive covenants would unduly privilege the interests of employers over the competing interest of employees. The legislature adopted Wis. Stat. § 103.465 at the suggestion of a legislator who argued that if the courts do not strike down restrictive covenants "containing overly broad and invalid provisions ... in [their] entirety," employers will be able to use their superior bargaining power "to insist upon unreasonable and excessive restrictions, secure in the knowledge that the promise will be upheld in part, if not in full."10 Section 103.465 thus "was enacted to effect a policy of protecting weaker parties in *327the bargaining process," a recognized and important goal of public policy in the State of Wisconsin.11
¶ 124. In interpreting and applying Wis. Stat. § 103.465, the courts consider the interests of both employers and employees, as well as the interests of the public. The case law states that a restrictive covenant is enforceable if it "(1) [is] necessary to protect the employer; (2) provide[s] a reasonable time limit; (3) provide^] a reasonable territorial limit;- (4) [is not] harsh or oppressive to the employee; and (5) [is not] contrary to public policy."12 In keeping with the statute, courts *328apply the following canons of construction 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."13
¶ 125. The legislature and the courts thus avoid a one-sided, "pro-employer" or "pro-employee" analysis of restrictive covenants. Reasonable covenants are enforced; unreasonable covenants are not enforced and are not rewritten by the courts to be reasonable.
¶ 126. I write separately to explain the rationale underlying Wis. Stat. § 103.465. The legislatively adopted policy should guide courts in deciding restrictive covenant cases.

 Our court has summarized the debate as follows:
An argument for giving effect to reasonable aspects of a restraint is the business need for restrictive covenants and the difficulty for larger businesses to tailor each covenant to the particular requirements of the individual employee. A principal argument against giving effect to reasonable aspects of a restraint is that the employer can fashion ominous covenants which affect the mobility *324of employees because of their in terrorem effect on employees who respect contractual obligations and their effect on competitors who do not wish to risk legal difficulties.... The legislature has in sec. 103.465 instructed the court as to the equities between the parties. Under sec. 103.465 if an indivisible covenant imposes an unreasonable restraint, the covenant is illegal, void, and unenforceable even as to so much of the covenant as would be a reasonable restraint.
Streiff v. Am. Family Mut. Ins. Co., 118 Wis. 2d 602, 614, 348 N.W.2d 505 (1984).

 "From the point of view of the employer, postemployment restraints are regarded as perhaps the only effective method of preventing unscrupulous competitors or employees from appropriating valuable trade information and customer relationships for their own benefit. Without the protection afforded by such covenants, it is argued, businessmen could not afford to stimulate research and improvement of business methods to a desirably high level, nor could they achieve the degree of freedom of communication within a company that is necessary for efficient operation." Harlan M. Blake, Employee Agreements Not to Compete, 73 Harv. L. Rev. 625, 627 (1960).

 Heyde Cos. v. Dove Healthcare, 2002 WI 131, ¶¶ 22-23, 258 Wis. 2d 28, 654 N.W.2d 830 (concluding that a no-hire provision was in violation of Wis. Stat. § 103.465 and stating *325that "the fundamental right of a person to make choices about his or her own employment is well-established").

 Gary Van Zeeland Talent, Inc. v. Sandas, 84 Wis. 2d 202, 214, 267 N.W.2d 242 (1978) (quoted with approval in Farm Credit Servs. v. Wysocki, 243 Wis. 2d 305, ¶ 9).

 Streiff, 118 Wis. 2d at 614 ("[T]he employer can fashion ominous covenants which affect the mobility of employees because of their in terrorem effect on employees who respect contractual obligations and their effect on competitors who do not wish to risk legal difficulties.").

 Heyde Cos., 258 Wis. 2d 28, ¶ 13.

 "[P]ostemployment restraints reduce both the economic mobility of employees and their personal freedom to follow their own interests. These restraints also diminish competition by intimidating potential competitors and by slowing down the dissemination of ideas, processes, and methods. They unfairly weaken the individual employee's bargaining position vis-a-vis his employer and, from the social point of view, clog the market's channeling of manpower to employments in which its productivity is greatest." Blake, supra note 2, at 627.

 Streiff, 118 Wis. 2d at 614.

 See also Heyde Cos., 258 Wis. 2d 28, ¶ 13 ("[T]he explicit purpose of § 103.465, as plainly stated in the statute, is to invalidate covenants that impose unreasonable restraints on employees.").

 Streiff, 118 Wis. 2d at 608-09.
The drafting record for Wis. Stat. § 103.465 contains a letter from Representative Richard E. Peterson of Waupaca *327County to the chief of the legislative reference library providing drafting instructions for the statute. Representative Peterson requested a bill drafted to reverse Fullerton Lumber Co. v. Torborg, 270 Wis. 133, 70 N.W.2d 585 (1955), in which this court enforced the reasonable aspects of an otherwise unreasonable restrictive covenant. Representative Peterson stated that "[a]t the time [an employment contract is] entered into, the bargaining position of the two contractors appears to me to be relatively unequal in that the party seeking the employment must, if he desires employment with the contracting party, consent to almost any restrictive covenant imposed." He concluded that the effect of the Fullerton decision was "to give to the employer complete latitude" in defining the scope of restrictive covenant, safe in the knowledge that the courts would enforce the covenant to any extent that it was reasonable.

 See Gen. Med. Corp. v. Kobs, 179 Wis. 2d 422, 432 n.7, 507 N.W.2d 381 (Ct. App. 1993) ("[S]ec. 103.465, Stats., was enacted to effect a policy of protecting weaker parties in the bargaining process: 'laws prohibiting covenants not to compete, or that are designed to protect a weaker party against the unfair exercise of superior bargaining power by another party, are likely to embody an important state public policy." (quoting Bush v. Nat'l School Studios, Inc., 139 Wis. 2d 635, 642, 407 N.W.2d 883 (1987)).

 Heyde Cos., 258 Wis. 2d 28, ¶ 16 (citing Lakeside Oil Co. v. Slutsky, 8 Wis. 2d 157, 162-63, 98 N.W.2d 415 (1959)).

 Heyde Cos., 258 Wis. 2d 28, ¶ 16 (citation omitted).