Wausau Medical Center v. Asplund
182 Wis. 2d 274, 1994 Wisc. App. LEXIS 363, 514 N.W.2d 34 (1994)
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Rule of Law:
A restrictive covenant is not reasonably necessary for an employer's protection, and is thus unenforceable, if the employer failed to acquire a protectible interest during the course of the employment, regardless of what interest it anticipated acquiring when the contract was signed.
Facts:
- Dr. Asplund was first employed as a vascular surgeon by Wausau Medical Center (WMC) from August 1988 to July 1989, after which he voluntarily left for a program in Iowa.
- Within a year, Asplund decided to return to Wausau and began negotiations to be re-hired by WMC.
- Negotiations initially stalled because Asplund objected to a restrictive covenant in the contract, but WMC refused to remove it.
- In August 1990, Asplund signed a second employment contract with WMC that contained a covenant not to compete for two years within Marathon County.
- Forty-five days after starting his second term of employment, Asplund gave WMC a sixty-day notice of his termination.
- While still employed by WMC, Asplund formed his own service corporation.
- After his employment with WMC officially ended (a total tenure of about three and a half months), Asplund began his own surgery practice in Wausau.
Procedural Posture:
- Dr. Asplund initiated the action in a Wisconsin trial court, seeking a declaratory judgment that the restrictive covenant was unenforceable.
- WMC obtained a temporary restraining order, but its subsequent motion for a temporary injunction to prohibit Asplund from practicing medicine was denied by the trial court.
- WMC filed a counterclaim against Asplund and a third-party complaint against his service corporation, alleging various claims including breach of contract.
- Asplund voluntarily dismissed his original claim, making WMC the plaintiff in the action.
- Asplund moved for summary judgment to dismiss all of WMC's claims.
- The trial court granted summary judgment in favor of Asplund, dismissing all of WMC's claims and awarding costs to Asplund.
- WMC (as appellant) appealed the trial court's orders to the Court of Appeals of Wisconsin.
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Issue:
Is a restrictive covenant in an employment contract reasonably necessary for the protection of the employer, and thus enforceable, when the employee worked for only a short duration and the employer did not actually acquire a protectible interest such as client relationships or an enhanced employee reputation?
Opinions:
Majority - Cane, P.J.
No. The restrictive covenant is not reasonably necessary for the protection of the employer and is therefore unenforceable. To determine the enforceability of a covenant not to compete, courts must assess its reasonableness not only based on the circumstances at the time of contracting but also on the facts of the employment relationship itself. An employer must acquire an actual protectible interest to justify enforcement. Here, Asplund's employment was too brief (three and a half months) for WMC to have acquired such an interest. WMC did not provide Asplund with a significant client or referral base, as evidenced by the fact that less than one-half of one percent of Asplund's subsequent charges came from former WMC patients. Furthermore, Asplund's unique surgical skills were acquired prior to his employment, not from WMC, and his short tenure was insufficient to materially enhance his reputation through his association with WMC. Because Asplund only provided 'legitimate and ordinary competition of the type a stranger could give,' the covenant was not reasonably necessary to prevent unfair competition and is void under Wisconsin statute § 103.465.
Analysis:
This decision establishes that the reasonableness of a non-compete covenant is evaluated based on the totality of the circumstances, including the actual duration and nature of the employment, not just the parties' expectations at the time of signing. It clarifies that a 'protectible interest' for an employer is not automatically created by an employment relationship but must be tangibly acquired through things like providing substantial client contacts, trade secrets, or enhancing an employee's skills and reputation. This precedent significantly strengthens the position of employees who leave a job after a very short period, making it difficult for employers to enforce non-competes where no genuine competitive advantage was actually transferred to the employee.
