Behnke v. Hertz Corp.
70 Wis. 2d 818, 1975 Wisc. LEXIS 1370, 235 N.W.2d 690 (1975)
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Rule of Law:
A restrictive covenant in an employment contract is void and unenforceable if its territorial scope is broader than the employee's actual field of activity or if the restriction is not reasonably necessary to protect the employer's legitimate business interests, such as trade secrets or customer lists.
Facts:
- Barbara A. Kreft was hired as a counter girl by Marvin A. Behnke's National Car Rental System, which operated only at the Milwaukee airport.
- Upon hiring, Kreft signed an employment agreement that stated: 'I agree not to work for any car rental competitor in the city of Milwaukee for one year if and when this present job is terminated.'
- Kreft's job duties were perfunctory, involving simple forms and identification checks, and did not involve any unique skills, trade secrets, or access to customer lists.
- Kreft worked for National at the airport location from May 26, 1972, until November 20, 1972.
- On or about November 20, 1972, Kreft terminated her employment with National and began working for the Hertz Corporation at its railroad-depot location in Milwaukee.
Procedural Posture:
- Marvin A. Behnke (d/b/a National Car Rental System) filed a lawsuit in a trial court against the Hertz Corporation and its employee, Keith A. Mott.
- The complaint alleged that Hertz induced Barbara Kreft to breach her restrictive employment contract with National.
- The case was tried before a jury, which returned a verdict in favor of the plaintiff, Behnke.
- The trial court entered a judgment awarding Behnke $982.26 in compensatory damages and $10,000 in punitive damages.
- The Hertz Corporation and Keith A. Mott, as appellants, appealed the judgment to the Supreme Court of Wisconsin.
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Issue:
Is a restrictive covenant in an employment contract that prohibits a former employee from working for any competitor within an entire city for one year enforceable when the employee's services were not unique, involved no trade secrets, and her work was confined to a single location within that city?
Opinions:
Majority - Heffernan, J.
No. A restrictive covenant is not enforceable under these circumstances because its territorial scope is broader than the employee's actual field of activity and the restrictions are not reasonably necessary for the employer's protection. The validity of such a covenant is governed by a standard of reasonableness. Under Wisconsin statute § 103.465, a covenant not to compete is only enforceable if the restrictions are 'reasonably necessary for the protection of the employer.' The court, referencing the Restatement of Contracts, noted that such restrictions are typically only justified to prevent the use of trade secrets, customer lists, or when the employee's services are of a unique character. Here, Kreft's services were not unique, and she had no access to protected information, meaning there was no legitimate employer interest that justified curtailing her future employment. Furthermore, the covenant's geographic scope, covering the entire city of Milwaukee, was impermissibly broad because Kreft's activities for National were confined to the airport. Citing precedent from Wisconsin Ice & Coal Co. v. Lueth, the court held that a restrictive covenant's territory can go no further than the field of the employee's actual activities. Because the covenant was unreasonable in both its necessity and its territorial scope, it is void as a matter of law.
Analysis:
This decision solidifies the principle that courts will strictly construe restrictive covenants in employment contracts against the employer. It establishes that the 'reasonableness' of a covenant is not an abstract concept but is tied directly to the specific circumstances of the employment, including the employee's role and actual work location. The case sets a clear precedent that a territorial restriction cannot be based on an employer's franchise area or potential market, but must be narrowly tailored to the employee's actual past activities. This ruling makes it significantly harder for employers to enforce broad non-compete agreements against low-level employees who do not possess trade secrets or unique skills.
