Wayne G. Tatge v. Chambers & Owen, Inc.
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SUPREME COURT OF WISCONSIN Case No.: 95-2928 Complete Title of Case: Wayne G. Tatge, Plaintiff-Appellant-Cross-RespondentPetitioner, v. Chambers & Owen, Inc., Defendant-Respondent-Cross-Appellant. ON REVIEW OF A DECISION OF THE COURT OF APPEALS Reported at: 210 Wis. 2d 51, 565 N.W.2d 150 (Ct. App. 1997-PUBLISHED) Opinion Filed: Submitted on Briefs: Oral Argument: Source of APPEAL COURT: COUNTY: JUDGE: JUSTICES: Concurred: Dissented: June 19, 1998 March 3, 1998 Circuit Rock James P. Daley Abrahamson, C.J., dissents (opinion filed) Bradley, J., joins Not Participating: ATTORNEYS: For the plaintiff-appellant-cross respondent petitioner there were briefs by Richard R. Grant and Consigny, Andrews, Hemming & Grant, S.C., Janesville and oral argument by Richard R. Grant. For the defendant-respondent-cross appellant there was a brief by Fred Gants, Lauri D. Morris and Quarles & Brady, Madison and oral argument by Fred Gants. No. 95-2928 NOTICE This opinion is subject to further editing and modification. The final version will appear in the bound volume of the official reports. No. 95-2928 STATE OF WISCONSIN : IN SUPREME COURT FILED Wayne G. Tatge, JUN 19, 1998 Plaintiff-Appellant-CrossRespondent-Petitioner, Marilyn L. Graves Clerk of Supreme Court Madison, WI v. Chambers & Owen, Inc., Defendant-Respondent-CrossAppellant. REVIEW of a decision of the Court of Appeals. ¶1 JON P. WILCOX, J. Affirmed. This is a review of a published decision of the court of appeals, Tatge v. Chambers & Owen, Inc., 210 Wis. 2d 51, 565 N.W.2d 150 (Ct. App. 1997), which affirmed a judgment and an order of the Circuit Court for Rock County, James P. Daley, Judge. The circuit court granted summary judgment in favor of the defendant Chambers & Owen, Inc. (Chambers & Owen) and thereby dismissed the Tatge's (Tatge) claim for wrongful discharge. plaintiff Wayne The circuit court also entered a judgment granting Chambers & Owen's post-verdict motion to dismiss Tatge's claim for negligent misrepresentation. ¶2 a cause There are two issues before us on review: (1) whether of action for breach of an employment contract is actionable in tort for misrepresentation under Wisconsin law; and (2) whether the narrow cause 1 of action for wrongful No. 95-2928 discharge established in Brockmeyer v. Dun & Bradstreet, 113 Wis. 2d 561, 335 N.W.2d 834 (1983), encompasses the discharge of an at-will employee for failing to sign a non-disclosure and non-compete agreement. contract is not contract cause We hold that a breach of an employment actionable of action in for Brockmeyer tort. We wrongful hold be is terminated for agreement. Accordingly, we affirm the decision of the court of sign a at-will not may under to an a employee discharge that maintained failing where also non-disclosure/non-compete appeals. ¶3 The relevant facts are not in dispute. became an employee of Chambers & Owen. In 1981, Tatge In late 1990, Chambers & Owen issued an Employee Handbook to its employees. the Handbook receipt on December 18, 1990, Tatge signed whereby he acknowledged that his employment with Chambers & Owen was "atwill, terminable at any time by the company at its sole discretion with or without cause and with or without notice." The receipt further explained contractual, and remains as contract expressly that such authorized by "such unless the employment and Board until of a is not written Directors is entered into and executed in writing by me and Chambers & Owen, Inc. . . ." ¶4 In early 1993, after several changes to Tatge's job duties and compensation arrangement, Chambers & Owen asked Tatge to sign a "Management Agreement" (the agreement). of the agreement contains a non-disclosure states: 2 Paragraph 1 provision that No. 95-2928 Employee recognizes and acknowledges that the customer data, programs, and business practices used or employed by Employer embody and involve the use of information of a confidential nature which represents an asset of substantial value. Employee will not, without prior authorization, during or after the term of employment with Employer, disclose such information to any person, firm, corporation, association, or other entity for any reason or purpose whatever. ¶5 Paragraph 2 of the agreement contains a covenant not to compete that provides: Covenant Not to Compete. Employee shall not, for a period of six (6) months after termination of his/her employment with Employer for any reason whatsoever, with or without cause on behalf of him/herself or any other person, firm, corporation, association, or other entity, directly or indirectly, engage in, assist in, or be connected in any manner with the sale, distribution, procurement of products or knowledge of those functions competitive with those sold by Employer under this Agreement to any person, firm, corporation, association, or other entity located within the Employers [sic] geographic service area during the six (6) months prior to said termination. ¶6 Beginning in April 1993, Tatge expressed his objection to the agreement and discussed it with the company's president, John Owen (Owen). At trial, Tatge testified that he had asked Owen what would happen if Tatge refused to sign the agreement and that Owen employment Tatge with security replied, "Nothing." Owen that would and be testified ongoing and also Owen terminable discussed told only him for job his what amounted to good cause. ¶7 At a final meeting on April 5, 1993, after Tatge was given the weekend to "think it over," Tatge again stated that he would not sign the agreement. Tatge told Owen that he had more 3 No. 95-2928 market value than his current compensation package provided for. Because Tatge would not sign the agreement, Chambers & Owen told Tatge that he would be terminated. That same day, Owen sent a letter to Tatge confirming his dismissal because he would not sign the agreement. The letter stated in pertinent part: This letter conversation today. is intended to confirm our As you know, we have requested our key employees to sign non-competitive agreements. . . . We have had different conversations on this issue. Today you informed me of your final decision not to sign the agreement. As a result, we are left with no alternative but to terminate your employment. . . . ¶8 On April 27, 1994, Tatge commenced suit against Chambers & Owen claiming wrongful discharge, breach of contract and three forms of fraudulent misrepresentation, including negligent, strict liability and intentional misrepresentation. ¶9 Both parties moved for summary judgment. On February 17, 1995, the circuit court denied Tatge's motion for partial summary judgment, discharge. and dismissed his claim for wrongful The circuit court reasoned that the agreement did not violate Wisconsin's restrictive covenant statute, Wis. Stat. § 103.465 (1991-92).1 The circuit court also denied Chambers & 1 All future statutory references are to the 1991-92 version of the statutes unless otherwise noted. Wisconsin Stat. § 103.465 provides: 103.465 Restrictive covenants in employment contracts. A covenant by an assistant, servant or agent not to compete with his employer or principal 4 No. Owen's motion to dismiss Tatge's breach of 95-2928 contract and misrepresentation claims, concluding that the latter should be tried only as to the alleged statements that Tatge's employment would be ongoing and that he could only be fired for cause. ¶10 the The subsequent trial was bifurcated. first contract phase, other the than jury found at-will insufficient employment, but At the end of evidence of determined a that Chambers & Owen made a representation of fact that Tatge was entitled to ongoing employment and termination only for cause. During the second phase, the circuit court granted Chambers & Owen's motion to dismiss both the liability misrepresentation claims. intentional and strict The circuit court allowed the negligent misrepresentation claim to proceed to trial. ¶11 The jury found for Tatge on the negligent misrepresentation claim, assessed his damages at $250,000 and found him 40% contributorily negligent. Upon Chambers & Owen's post-verdict motions for judgment notwithstanding the verdict, to change answers and for directed verdict, the circuit court dismissed Tatge's negligent misrepresentation claim. Tatge appealed. during the term of the employment or agency, or thereafter, 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 such restrictive covenant imposing an unreasonable restraint is illegal, void and unenforceable even as to so much of the covenant or performance as would be a reasonable restraint. 5 No. ¶12 order The and discharge court of judgment of an appeals by concluding: employee disclosure/non-compete affirmed for agreement (1) the that failing does to not circuit an court's employer's sign give 95-2928 a rise nonto a wrongful discharge claim; and (2) that a breach of an employment contract is not actionable in tort for misrepresentation. On September 18, 1997, we granted Tatge's petition for review. I. ¶13 The first issue we consider is whether a cause of action for breach of an employment contract is actionable in tort for misrepresentation under Wisconsin law. This presents a question of law which we review de novo, without deference to the conclusions of the circuit court or the court of appeals. See Kara B. v. Dane County, 205 Wis. 2d 140, 145-46, 555 N.W.2d 630 (1996). ¶14 Before considering the viability of a misrepresentation claim in a breach of contract action, we first shed light on the jury's determination that Tatge's employment contract was a contract for at-will employment only. As we have stated, the jury found insufficient evidence that Chambers & Owen had entered into a contract with Tatge to provide him with ongoing employment, terminable only for good cause.2 2 Specifically, the special verdict form in this case illustrates that the following questions were presented to the jury: Question 1: Did Chambers & Owen, Inc., enter into a contract to provide Wayne Tatge with ongoing employment? 6 No. ¶15 95-2928 Despite the jury's finding, the circuit court allowed the misrepresentation claim to proceed to trial. Then, at the hearing for the post-verdict motions, the circuit court, relying on Brockmeyer, stated: The jury found that there was no contract. That was the first verdict found that there was no contract for ongoing employment. There was no contract for termination. And based upon that, I believe that ends it as it relates to the termination. As a result, I have, as indicated, dismissed the cause of action. Record on Appeal at 94:6 (Hearing Transcript August 29, 1995). ¶16 Rather than challenge the jury's verdict that he was an employee-at-will, Tatge contests the circuit court's postverdict grant of judgment notwithstanding the verdict. Accordingly, Tatge argues that misrepresentation by an employer is a valid tort in Wisconsin as presented to and determined by the jury. More specifically, Tatge argues that Chambers & Owen misrepresented that his employment would be ongoing and terminable only for cause, and that Chambers & Owen thereafter terminated him without cause. address his ANSWER: misrepresentation claim under tort law not No. Question 2: ANSWER: Tatge then asks this court to Did Chambers & Owen enter into a contract to provide Wayne Tatge employment with termination only for good cause? No. Record on Appeal at 54:1 (Special Verdict June 28, 1995) 7 as a No. 95-2928 wrongful discharge or breach of contract claim under contract law. an He advocates this approach by arguing that employers have independent duty to their employees to refrain from misrepresentation. ¶17 We decline to give our blessing to such an irreverent marriage of tort and contract law. As we explain below, the circuit court was correct to grant Chambers & Owen's motion for judgment notwithstanding the verdict. ¶18 "[T]here must be a duty existing independently of the performance of the contract for a cause of action in tort to exist." Landwehr v. Citizens Trust Co., 110 Wis. 2d 716, 723, 329 N.W.2d 411 (1983). misrepresentation claim We cannot overlook the fact that Tatge's finds its lifeline performance of an employment contract. in the improper In other words, Tatge argues that Chambers & Owen's alleged representation that Tatge would be terminable only for good cause tainted his subsequent termination from employment without good cause. ¶19 The breach of an employment contract is not actionable in tort. See Brockmeyer, 113 Wis. 2d at 574-76 (holding that the breach of an at-will employment contract is not actionable in tort);3 Dvorak v. Pluswood Wisconsin, Inc., 121 Wis. 2d 218, 3 As the court of appeals stated, "We recognize that Tatge's misrepresentation claim does not depend upon the public policy rationale articulated in Brockmeyer." Tatge v. Chambers & Owen, Inc., 210 Wis. 2d 51, 59, 565 N.W.2d 150 (Ct. App. 1997). Nevertheless, a plain reading of Brockmeyer illustrates that any claim which is dependent upon a wrongful termination from atwill employment is not actionable in tort. See generally Brockmeyer v. Dun & Bradstreet, 113 Wis. 2d 561, 335 N.W.2d 834 (1983). 8 No. 220, 358 N.W.2d 544 (Ct. App. 1984) (reaching conclusion regarding a term employment contract). 95-2928 the same In this case, no duty to refrain from misrepresentation exists independently of the performance of the at-will employment contract. In fact, Tatge's request for damages in this case illustrates that his misrepresentation claim is dependent upon his termination from employment: have changed "Plaintiff, his but position for on the signing misrepresentation, and remained would employed, earning $250,000 more in wages and benefits after mitigation." See Tatge Brief at 46.4 ¶20 from Because it is tied employment, Tatge's inextricably to misrepresentation his claim termination was properly dismissed by the circuit court. ¶21 N.W.2d Tatge cites Hartwig v. Bitter, 29 Wis. 2d 653, 139 644 (1966), for the proposition that employees may maintain a tort claim of misrepresentation against an employer who misrepresents employer. The the nature court of of their appeals employment held that with the Hartwig is distinguishable, see Tatge, 210 Wis. 2d at 58-59, and we agree. In Hartwig, the employer persuaded two real estate agents to 4 We do not mean to suggest that litigants may circumvent the holding of this court simply by pleading damages which somehow do not arise solely from one's termination of employment. As we have said, a duty must exist independently from the performance of the employment contract in order to maintain a cause of action in tort. See Landwehr v. Citizens Trust Co., 110 Wis. 2d 716, 723, 329 N.W.2d 411 (1983). The discussion regarding Tatge's asserted damages is relevant only to make clear that his tort claim is dependent upon his termination from employment. 9 No. 95-2928 work for him by misrepresenting, among other things, that he had a list of "prospects" who were interested in buying or selling business enterprises; that the agents would earn a lot of money by selling to these "prospects"; and that he, the employer, was closing sales "right along." ¶22 alleging When the that agents they See Hartwig, 29 Wis. 2d at 655. brought were suit against damaged by the the employer, employer's misrepresentations, the employer moved to dismiss the complaint by arguing that the facts alleged did not constitute a cause of action. See id. at 655-56. We held that a viable cause of action for misrepresentation had been pleaded. See id. at 658- 59. ¶23 As the court of appeals noted, the agents were not employees at the time of the misrepresentation. Wis. 2d at 59. See Tatge, 210 Because no employment relationship existed at the time of the misrepresentations, any duty to refrain from misrepresentation must have existed independently performance of an employment contract. inapposite,5 and we are left 5 with but from the Therefore, Hartwig is one issue for our Tatge's attempt to utilize Hausman v. St. Croix Care Center, Inc. 207 Wis. 2d 402, 558 N.W.2d 893 (Ct. App. 1996), rev'd 214 Wis. 2d 654, 571 N.W.2d 393 (1997), and Wausau Medical Center, S.C. v. Asplund, 182 Wis. 2d 274, 514 N.W.2d 34 (Ct. App. 1994) is no more persuasive. Although the court of appeals in Hausman briefly "entertained" the employees' misrepresentation claim against their employer, the alleged misrepresentation was not dependent upon a breach of their employment contract. Rather, the employees claimed that they would have been statutorily protected from termination had the employer not made the misrepresentation. See Hausman, 207 Wis. 2d at 410-11. 10 No. determination: whether Tatge has a viable contract 95-2928 cause of action for wrongful discharge in accordance with our decision in Brockmeyer. II. ¶24 We next consider whether the narrow cause of action for wrongful discharge established in Brockmeyer encompasses the discharge of an at-will employee for failing to sign a nondisclosure/non-compete agreement. Our consideration of this issue requires us to determine whether as a matter of law, Tatge has identified a fundamental and well-defined public policy in Wis. Stat. § 103.465 so as to trigger the Brockmeyer exception to the employment-at-will doctrine. Thus, we are presented with a question of law which this court reviews de novo, without deference to the conclusions of the circuit court or the court of appeals. Wis. 2d 100, See Kempfer 107-08, Wis. 2d at 574. 564 v. Automated N.W.2d 692 Finishing, (1997); Inc., 211 Brockmeyer, 113 In addition, we review the circuit court's summary judgment ruling on this question de novo, and apply the same methodology as the circuit court. See Wisconsin Dep't of In Wausau Medical, the alleged misrepresentation, as in Hartwig, occurred at a time when no employment relationship existed between the parties that is, the misrepresentation induced the employee to enter into the employment relationship. See Wausau Medical, 182 Wis. 2d at 290-91. For a discussion of such "truth-in-hiring" claims, see Sandra J. Mullings, Truth-inHiring Claims and the At-Will Rule: Should an Employer Have a License to Lie?, 1997 Colum. Bus. L. Rev. 105, 131 (concluding that "the right to terminate employment at will is not a license to lie in order to bring about that employment."). 11 No. 95-2928 Corrections v. Kliesmet, 211 Wis. 2d 254, 259, 564 N.W.2d 742 (1997). A. ¶25 Before addressing the Brockmeyer public policy exception to employment-at-will, we first respond to Chambers & Owen's argument that Tatge's claim should fail because Wis. Stat. § 103.465 is inapplicable to the facts of this case. This argument is based on the following exchange between the parties. ¶26 Tatge (paragraph 1 asserts of the that the agreement) not non-disclosure the provision non-compete provision (paragraph 2) is unreasonable within the meaning of Wis. Stat. § 103.465. no time In particular, Tatge contends that since there are or disclosure geographic paragraph, limitations the set forth non-disclosure in the provision non- is an unreasonable restraint of trade under § 103.465 and this court's decision in Gary Van Zeeland Talent, Inc. v. Sandas, 84 Wis. 2d 202, 267 N.W.2d 242 (1978). ¶27 Chambers & Owen responds by arguing that Wis. Stat. § 103.465 does not apply to non-disclosure provisions, but "by its terms" applies only to covenants not to compete. Because § 103.465 is that a Brockmeyer wrongful sustained by relying on inapposite, public Chambers discharge policy claim evidenced disagree. 12 & Owen may by not asserts be that statute. We No. ¶28 95-2928 Leaving aside the question whether the non-disclosure provision satisfies the commands of Wis. Stat. § 103.465,6 we conclude that § 103.465 applies to the non-disclosure provision in this case. We need look no further than Van Zeeland to reach this conclusion. The Van Zeeland court applied § 103.465 to a non-disclosure agreement containing virtually the same language as the paragraph involved here, see Van Zeeland, 84 Wis. 2d at 208, 218-220, because "[i]t is apparent that what [the employer] seeks in this action is the restraint of competition . . . ." Id. at 209. ¶29 As in Van Zeeland, it is clear that Chambers & Owen seeks to restrain competition through use of the non-disclosure provision. It seeks to shield its customer data, programs, and business practices from competitors' eyes because it "represents an asset of substantial value." This is the essence of a trade restraint; 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." Therefore, we proceed to analyze Tatge's wrongful discharge claim under Brockmeyer. B. ¶30 the In Brockmeyer, we traced the history and evolution of employment-at-will 566-68. We need not doctrine. repeat that 6 Brockmeyer, discussion 113 Wis. 2d here; at Wisconsin Because we conclude that Tatge has not identified a fundamental and well-defined public policy in Wis. Stat. § 103.465 sufficient to trigger the Brockmeyer exception to employment-at-will, we need not determine whether the nondisclosure provision is indeed unreasonable. 13 No. 95-2928 first recognized the doctrine in Prentiss v. Ledyard, 28 Wis. 131, 133 (1871), and it is now a stable fixture in Wisconsin law. See, e.g., Hausman v. St. Croix Care Center, Inc., 214 Wis. 2d 654, 662, 571 N.W.2d 393 (1997) ("The employment-at-will doctrine is an established general tenet of workplace relations in this jurisdiction."). The employment-at-will doctrine dictates that where employment is for an indefinite term, an employer may discharge an employee "for good cause, for no cause, or even for cause morally wrong, without being thereby guilty of legal wrong." 113 Brockmeyer, Wis. 2d at 567 (internal quotation marks and citations omitted). ¶31 "to Despite statutory modification of the at-will doctrine curb harsh applications and abuse of the rule," we recognized, as have other state courts, "the need to protect workers who are wrongfully discharged under circumstances not covered by safeguarded service any by legislation a collective regulations." or whose bargaining Brockmeyer, 113 job security agreement Wis. 2d is or at not civil 567-68. Therefore, we adopted a "narrow public policy exception" to the employment-at-will doctrine. That exception provides that "an employee has a cause of action for wrongful discharge when the discharge is contrary to a fundamental and well-defined public policy as evidenced by existing law." 7 Id. at 572-73.7 "Existing law" was originally limited to constitutional or statutory provisions, see Brockmeyer, 113 Wis. 2d at 576, but has since been expanded to include administrative rules. See generally Winkelman v. Beloit Memorial Hosp., 168 Wis. 2d 12, 483 N.W.2d 211 (1992). 14 No. ¶32 95-2928 We have since modified the public policy exception to the employment-at-will doctrine in several ways. In Wandry v. Bull's Eye Credit Union, 129 Wis. 2d 37, 46-47, 384 N.W.2d 325 (1986), we include the provision. extended spirit, Brockmeyer's wrongful as the well as discharge letter of a rule to statutory See also Schultz v. Production Stamping, 148 Wis. 2d 17, 22, 434 N.W.2d 780 (1989); Bushko v. Miller Brewing Co., 134 Wis. 2d 136, 143-44, 396 N.W.2d 167 (1986). In Bushko, we expressly limited the scope of the public policy exception to situations command, where the instruction, employee or is request terminated of the for employer public policy as established by existing law. refusing to a violate See Bushko, 134 Wis. 2d at 142; see also Kempfer, 211 Wis. 2d at 110-111, 115. ¶33 Finally, we recently expanded the public policy exception to include situations where an employee is terminated for his or her compliance with an affirmative obligation under law. See Hausman, 214 Wis. 2d at 668. In Hausman we stated: Where the law imposes an affirmative obligation upon an employee to prevent abuse or neglect of nursing home residents and the employee fulfills that obligation by reporting the abuse, an employer's termination of employment for fulfillment of the legal obligation exposes the employer to a wrongful termination action. In such instances, the employee may pursue a wrongful termination suit under the public policy exception regardless of whether the employer has made an initial request, command, or instruction that the reporting obligation be violated. Id. C. 15 No. ¶34 Stat. 95-2928 Citing several of these cases, Tatge argues that Wis. § 103.465 articulates a fundamental and well-defined public policy that unreasonable restraints of trade will not be placed upon employees. According to Tatge, the nature of this public policy is evidenced by three cases: Streiff v. American Family Mut. Ins. Co., 118 Wis. 2d 602, 348 N.W.2d 505 (1984); Van Zeeland, 84 Wis. 2d 202; and General Medical Corp. v. Kobs, 179 Wis. 2d 422, 507 N.W.2d 381 (Ct. App. 1993). ¶35 We need not address these cases in detail because we agree that Wis. Stat. § 103.465 evidences a strong public policy against the enforcement of trade restraints which are determined to be unreasonable upon all employees, including those employed at will. We do not agree, however, that § 103.465 evidences a public policy contrary to an employer's requirement that its employee sign a non-disclosure/non-compete agreement which that employee considers § 103.465.8 to be unreasonable within the meaning of None of these cases illustrate, or even suggest, that such a policy is evidenced by the statute. ¶36 We have often repeated that the Brockmeyer public policy exception to the employment-at-will doctrine is a narrow one. See, Wisconsin e.g., public Kempfer, policy 211 Wis. 2d exception to at the 113 ("Thus, the employee-at-will doctrine is very narrow."); Bushko, 134 Wis. 2d at 146 ("The 8 This is the practical effect of Tatge's argument that Wis. Stat. § 103.465 prohibits the "imposition" of an unreasonable restrictive covenant. According to Tatge, the "imposition" of a restrictive covenant occurs "at the time that [Tatge] signs it." Oral argument transcript. 16 No. 95-2928 public policy exception of Brockmeyer must be reflected clearly in existing law . . . ."); Brockmeyer, 113 Wis. 2d at 578-79 (illustrating that a statute must contain a "clearly defined mandate of public policy against discharging an employee" for engaging in the employer-proscribed conduct). A plain reading of Wis. Stat. § 103.465 reveals that Tatge has not identified such a clear and well-defined public policy. ¶37 The statute states that covenants not to compete are "lawful and enforceable only if the restrictions imposed are reasonably necessary principal." Wis. "[a]ny restrictive such for Stat. the protection § 103.465. of It covenant the then imposing employer indicates an or that unreasonable restraint is illegal, void and unenforceable even as to so much of the covenant performance as would be a reasonable Id. (emphasis added). restraint." ¶38 or The clear public policy manifested by Wis. Stat. § 103.465 is to protect the employee from compliance with the terms of an "unreasonable" restrictive that covenant void and unenforceable. stated, "[w]hen a restrictive covenant by rendering As the court of appeals covenant is unreasonable, the public policy of Wisconsin is not to create a cause of action, but to void the covenant." public policy agreement is remains the reasonable Tatge, 210 Wis. 2d at 57. same within regardless the meaning of of whether The the § 103.465. Therefore, although § 103.465 evinces clear public policy for this jurisdiction, Tatge has not identified a fundamental and 17 No. 95-2928 well-defined public policy sufficient to trigger the Brockmeyer exception to employment-at-will.9 ¶39 Neither the spirit nor the letter of Wis. Stat. § 103.465 establishes a well-defined public policy in Wisconsin against an employee's signing a covenant not to compete that he or she presumes to be unreasonable and with good reason. We have previously held that the validity of a restrictive covenant is to be established by examination circumstances which surround it. of the particular See Rollins Burdick Hunter of Wisconsin, Inc. v. Hamilton, 101 Wis. 2d 460, 468, 304 N.W.2d 752 (1981) ("[W]hat is reasonable varies from case to case, and what may be unreasonable in one instance may be very reasonable in another."). ¶40 the In Rollins, we made clear that the task of determining "reasonableness" of a restrictive covenant within the meaning of Wis. Stat. § 103.465 is not to be undertaken without a thorough examination of the facts of each individual case. In particular, we noted that the following factors would have to be considered in order to make such a determination: (1) the extent to which the information sought to be protected is vital to the 9 The dissent's position is perplexing. According to the dissent, an employer enforces a non-disclosure agreement when the employer terminates its employee for failing to sign that agreement. See Dissent at 1. Ordinarily, one would assume that enforcement of a non-disclosure agreement could only occur after: (1) the parties actually agreed to its terms; (2) the employee sought to disclose allegedly confidential information; and (3) the employer attempted to prevent the disclosure of that information by calling upon the agreement. The dissent's reasoning to the contrary is unfounded. 18 No. 95-2928 employer's ability to conduct its business; (2) the extent to which the employee actually had access to that information; and (3) the extent to which through other sources. ¶41 such information could be obtained See id. at 470. We also stated: As to whether the restraint is unreasonable to the employee, we do not see how such a determination could be made without considering additionally the extent to which the restraint on competition actually inhibits the employee's ability to pursue a livelihood in that enterprise, as well as the particular skills, abilities, and experience of the employee sought to be restrained. These, of course, are not exhaustive, since the very essence of what is reasonable involves the totality of the circumstances. Id. ¶42 Were we to apply the Brockmeyer exception to the facts of this case, at-will employees could indiscriminately decline to sign non-disclosure/non-compete agreements which in their own minds are "unreasonable," and subsequently bring discharge claim if terminated for doing so.10 appeals stated, "all restrictive wrongful discharge cases." covenant a wrongful As the court of cases would become Tatge, 210 Wis. 2d at 56-57. 10 Not At-will employees might even refuse to sign nondisclosure/non-compete agreements in bad faith, or when motivated by purely self-serving desires. For example, an atwill employee who is terminated for refusing to sign a nondisclosure/non-compete agreement under the guise that it is "unreasonable" within the meaning of Wis. Stat. § 103.465, but who truthfully intended to use the agreement as a bargaining tool for obtaining a pay increase or other work-related benefits could maintain a wrongful discharge action against the employer. We decline to promote such disingenuous tactics. 19 No. 95-2928 surprisingly, Wis. Stat. § 103.465 is devoid of any suggestion that the legislature intended such an anomalous result. ¶43 Once the wrongful discharge claim is filed, Tatge's approach would base the claim on hypothetical facts, before an employer has even sought to enforce the allegedly unreasonable agreement. Courts would be required to engage in fact-intensive inquiries to determine whether an employer has a protectable interest and whether it is reasonable as to the employee without actual facts regarding the specific information sought to be protected, the length of employment and the nature of the competition. ¶44 We decline to adopt such a dubious and unpredictable approach, regardless of whether the agreement was enforceable. Therefore, we hold that Tatge has not identified a fundamental and well-defined public policy in Wis. Stat. § 103.465 sufficient to trigger the Brockmeyer exception to employment-atwill.11 11 In concluding that Wis. Stat. § 103.465 evinces a Brockmeyer-worthy public policy exception to employment-at-will, the dissent spends most of its time discussing the injustices produced when employees are compelled by the hand of "superior bargaining power" to shoulder the burden of "ominous covenants" which "loom over the employee" and have an "in terrorem effect." See generally Dissent. See also Streiff v. American Family Mut. Ins. Co., 118 Wis. 2d 602, 614, 348 N.W.2d 505 (1984). In our assessment, this ignores the real issue presented for our review: does § 103.465 evidence a clear and well-defined public policy contrary to an employer's requirement that its employee sign a non-disclosure/non-compete agreement? We reject the dissent's approach, which apparently would extend the narrow Brockmeyer exception to all situations which ring of some perceived unfairness, even if the statute says nothing about it. 20 No. 95-2928 D. ¶45 Our decisions in Hausman, Kempfer and consistent with the conclusion we reach today. Wandry are In Hausman, we determined that Wis. Stat. § 940.295(3) (1993-94) evidences a strong public policy of protecting nursing home residents, such that the narrow Brockmeyer exception should be expanded to include an employee's actions which comply with an affirmative obligation to act to prevent that abuse or neglect of See Hausman, 214 Wis. 2d at 665-67. nursing home residents. ¶46 suspected Wisconsin Stat. § 940.295(3) (1993-94) states clearly persons who "knowingly permit[] another person to" intentionally or recklessly abuse or neglect a patient/resident of a nursing home would be guilty of up to a Class D felony for their failure to act. See § 940.295(3) (1993-94) (quoted in Hausman, 214 Wis. 2d at 658-59 n.3). that employers who terminated their We therefore concluded employees for fulfilling their legal obligation would expose themselves to a wrongful discharge suit. See Hausman, 214 Wis. 2d at 668. We are presented with no affirmative legal obligation in this case. ¶47 Kempfer also provides a clear example of a statutory statement of public policy that is sufficient to trigger the Brockmeyer Kempfer's exception employer to asked employment-at-will. him to knowledge that Kempfer did not have the required license. See § 343.05(2)(a) (1993-94), truck case, full Stat. a that with Kempfer, 211 Wis. 2d at 106-107. drive In The applicable statute, Wis. provided that no person may operate a commercial motor vehicle upon the state's highways 21 No. 95-2928 unless the person has a valid commercial driver's license. See id. at 113 n.2. ¶48 promote We held that Kempfer had identified a public policy to highway penalties a safety policy so through the fundamental use and of regulations well-established trigger the Brockmeyer exception to employment-at-will. at 113-14. as and to See id. We are not presented with such a clear statement of public policy in this case. ¶49 In Wandry, we held that Wis. Stat. § 103.455 (1983-84) "articulates a fundamental and well-defined public policy proscribing economic coercion by an employer upon an employee to bear the burden of a work-related loss when the employee has no opportunity employee's to show that carelessness, Wandry, 129 Wis. 2d at 47. the loss was negligence, or not caused wilful by the misconduct." Citing similar language between Wis. Stat. § 103.465 and Wis. Stat. § 103.455 (1983-84), Tatge argues that Wandry's interpretation of the latter statute commands a different result in this case.12 12 The statute at issue in Wandry provided in pertinent part: 103.455 Deductions for Faulty Workmanship, Loss, Theft or Damage: No employer shall make any deductions from the wages due or earned by any employee . . . for defective or faulty workmanship, lost or stolen property or damage to property, unless the employee authorizes the employer in writing to make such deductions or unless the employer and a representative designated by the employee shall determine that such defective or faulty work, loss or theft, or damages are due to the worker's negligence, carelessness, or wilful and intentional conduct on the part of such employee . . . . Any agreement entered into by 22 No. ¶50 95-2928 Specifically, Tatge cites the language which provided, "[a]ny agreement entered into by employer and employee contrary to this section shall be void and of no force and effect." Stat. § 103.455 (1983-84). Wis. According to Tatge, if the public policy of Wis. Stat. § 103.465 is merely to void the covenant, so too must the public policy of Wis. Stat. § 103.455 (1983-84) be to void the agreement a result directly at odds with our holding in Wandry. ¶51 We disagree. Wisconsin Stat. § 103.455 (1983-84) contained a clear expression of public policy by explicitly barring an employer from making deductions from its employee's wages unless certain conditions had been met. policy, the statute As an additional statement of public indicates that contravenes that command would be void. any agreement which In this case, the sole expression of public policy revealed by Wis. Stat. § 103.465 is to render void covenant. and unenforceable an unreasonable restrictive There is no clear expression of public policy which explicitly bars an employer's practice of requiring its employees to sign allegedly unreasonable restrictive covenants. E. ¶52 Finally, we note briefly that our decision is also consistent with the conclusion reached by the Vermont Supreme Court in a nearly identical case. Inc., 683 refused A.2d to 386 sign (Vt. a 1996). See Madden v. Omega Optical, In Madden, Confidentiality, the plaintiffs Disclosure, employer and employee contrary to this section shall be void and of no force and effect. . . . 23 and No. 95-2928 Noncompetition Agreement and were terminated as a result. id. at 388. wrongful See In their subsequent suit for breach of contract, discharge, and promissory estoppel, the plaintiffs argued in part that their termination for refusing to sign the agreement constituted public policy. ¶53 whether The policy.13 wrongful discharge in violation of that, regardless of See id. at 391. Vermont the termination a Supreme agreement for was refusing See id. Court to held enforceable, sign it did the not plaintiffs' violate public In reaching this conclusion, the court noted that "[i]f the Agreement is unenforceable, plaintiffs took no risk by signing it because they could later Agreement when defendant sought to enforce it." ¶54 The same reasoning applies here. challenge the Id. Tatge gambles little by signing the agreement; in the event that Chambers & Owen later sought to enforce the agreement, Tatge could challenge it as unenforceable at that time. Upon such a challenge, Wis. Stat. § 103.465 imposes a heavy burden on the employer who seeks to enforce a covenant not to compete. entire covenant "unreasonable." void if any The statute renders the portion of it is deemed See Wis. Stat. § 103.465; see generally George A. Richards, Drafting and Enforcing Restrictive Covenants Not to Compete, 55 Marq. L. Rev. 241 13 (1972). This burden was The Vermont Supreme Court's decision was based not upon principles of public policy evidenced by statutory or constitutional law, but upon general and societal notions of public policy. See Madden v. Omega Optical, Inc., 683 A.2d 386, 391 (Vt. 1996). 24 No. specifically imposed so that "employers possessing 95-2928 bargaining power superior to that of the employees" would not be encouraged "to insist upon unreasonable and excessive restrictions, secure in the knowledge that the promise will be upheld in part, if not in full." Streiff, 118 Wis. 2d at 608-609. III. ¶55 Because the breach of an employment contract is not actionable in tort, Tatge's claim for misrepresentation fails as a matter of law. Furthermore, since Tatge has not identified a fundamental well-defined § 103.465 and sufficient to public trigger the policy in Brockmeyer Wis. Stat. exception to employment-at-will, there remains no genuine issue of fact for trial, and summary judgment was properly granted on his claim for wrongful discharge. By the Court. The decision affirmed. 25 of the court of appeals is No. 95-2928.ssa ¶56 SHIRLEY S. ABRAHAMSON, CHIEF JUSTICE (Dissenting). Under the majority opinion, Wisconsin employers are now free to present the following ultimatum to their at-will employees: sign a nondisclosure agreement (regardless of its legality), or you're fired. I conclude that the court should recognize the right of an employee-at-will who claims that a nondisclosure agreement is void under Wis. Stat. § 103.465 to sue for wrongful discharge. ¶57 For the reasons set forth, I dissent. I agree with the majority opinion that "§ 103.465 evidences a strong public policy against the enforcement" of unreasonable trade restraints and that § 103.465 is applicable to the nondisclosure clause in this case. Majority op. at 16. What the majority opinion fails to see, however, is that when an employer terminates an at-will employee for refusing to sign an illegal nondisclosure agreement, the employer is enforcing the illegal agreement. ¶58 Contrary to the majority opinion's assertion, enforcement of a nondisclosure agreement does not start when an employer attempts agreement. to Rather prevent an enforcement employee of a from violating nondisclosure the agreement starts when an employee is asked to sign the agreement. The language and the legislative history of Wis. Stat. § 103.465 make clear that § 103.465 was designed to govern the employer and employee language of in entering the statute a covenant refers to duration of employment and thereafter. 1 not to covenants compete. governing The the No. 95-2928.ssa ¶59 The drafting record of Wis. Stat. § 103.465 includes a letter by Representative Richard E. Peterson of Waupaca County to the legislative reference instructions for § 103.465. library giving drafting Representative Peterson explained that he wanted a bill drafted to reverse Fullerton Lumber Co. v. Torberg, 270 Wis. 133, 70 N.W.2d 585 (1955), in which the court enforced the reasonable aspects of an invalid covenant not to compete. Representative Peterson explained his concerns about Fullerton as follows: "[a]t the time the contract was entered into, the bargaining position of the two contractors appears to me to be relatively unequal in that the party seeking employment must, if he desires employment with the contracting consent to almost any restrictive covenant imposed. party, The effect [of the Fullerton decision] is to give to the employer complete latitude" in setting forth the terms of the agreement, including the geographical and time limits imposed.14 ¶60 Representative Peterson wanted the bill drafted to put the two contracting parties in more equal bargaining positions and to avoid giving "a green light" to employers in writing agreements not to compete.15 The reasoning and result of the 14 See Representative Richard Peterson's letter to Mr. M.G. Toepel, Legislative Reference Library, Feb. 26, 1957, in Legislative Drafting File, Wis. Stat. § 103.465; Stewart Macaulay, Supplementary Comments in Richard Danzig, The Capability Problem in Contract Law: Further Readings on WellKnown Cases, at 61 (1978). 15 See Representative Richard Peterson's letter to Mr. M. G. Toepel, Legislative Reference Library, Feb. 26, 1957, in Legislative Drafting File, Wis. Stat. § 103.465. 2 No. 95-2928.ssa majority opinion are contrary to the legislative purpose of Wis. Stat. § 103.465. ¶61 With this background, I turn to the facts of this case. I ¶62 One implication of the majority opinion is that the nondisclosure agreement in this case is void and hence illegal. The majority opinion concedes that the nondisclosure provision drafted by the employer in this case "contains virtually the same language," majority op. at 13, as the nondisclosure agreement in Gary Van Zeeland Talent, Inc. v. Sandas, 84 Wis. 2d 202, 267 N.W.2d 242 (1978). The Van Zeeland court struck down the nondisclosure agreement under Wis. Stat. § 103.465 because it contained no geographic or time limits. See Van Zeeland, 84 Wis. 2d at 218. ¶63 The nondisclosure agreement in this case, like the nondisclosure agreement in Van Zeeland, is unreasonable and void under Wis. Stat. § 103.465. But under the majority opinion, employers employees may nondisclosure employment. force at-will agreements Thus the under threat majority opinion to sign of such illegal termination "tends to of encourage employers possessing bargaining power superior to that of the employees to insist restrictions . . . ." upon unreasonable and excessive Streiff v. American Family Mut. Ins. Co., 118 Wis. 2d 602, 608-09, 348 N.W.2d 505 (1984). I know of no other court, other than the court of appeals in this case, that has condoned the signing of an illegal nondisclosure agreement. 3 No. 95-2928.ssa ¶64 appears Although to be nondisclosure the nondisclosure illegal, in many agreement is uncertain determination.16 agreement instances until in the this validity a case a makes court of a Under the majority opinion an at-will employee who is uncertain about whether an agreement is legal has only one way to test the validity of the agreement: sign the agreement, breach the agreement, and wait until the employer sues to enforce it. This method is not risk-free as an employee may be liable in damages for breaching the agreement should a court later find the nondisclosure agreement to be valid. ¶65 Under the majority opinion, if an employee refuses to sign the agreement (regardless of its legality), the employee can be discharged. If an employee brings a declaratory judgment action to determine the validity of the agreement, the employee can be discharged. II ¶66 The situation. majority If an opinion employee puts refuses employers to sign in a a win-win nondisclosure agreement (even if it is illegal), the employer can discharge the employee without liability for wrongful discharge. If the employee signs the agreement, the terms of the agreement loom 16 Even in this case there may be some doubt about the legality of the nondisclosure agreement. Some commentators have criticized the reasoning of the Van Zeeland court, arguing that imposing territorial or time limits defeats the purpose of nondisclosure agreements. See III State Bar of Wis., Wis. Employment Law, § 15.75, at 15-78 to 15-79 (1994). 4 No. 95-2928.ssa over the employee both during the course of employment and afterwards. ¶67 that an Majority The majority opinion justifies its holding by claiming employee "gambles op. 24. at little What by the signing majority the agreement." opinion fails to recognize is that an employee presented with a nondisclosure agreement (regardless of its legality), incurs significant risks by refusing to sign or by signing the agreement. Representative Peterson life apparently understood these facts of when he proposed Wis. Stat. § 103.465. ¶68 An employee presented with a nondisclosure agreement is forced into a lose-lose situation. If the employee refuses to sign the agreement, the employee risks termination without any right to sue for wrongful discharge. the agreement, expenses when the he employee or she risks chooses If the employee signs a lawsuit and litigation to violate the agreement. Alternatively, the employee who signs the agreement may feel compelled to respect his or her contractual obligations (regardless of the legality of the agreement), thereby forgoing other employment expenses. opportunities in order to avoid litigation Moreover, prospective employers may refuse to hire an employee who has signed a nondisclosure agreement, regardless of their assessment of the legality of the agreement, for fear of buying themselves a lawsuit.17 17 See General Med. Corp. v. Kobs, 179 Wis. 2d 422, 425, 507 N.W.2d 381 (Ct. App. 1993) (plaintiff alleged tortious interference against competitor that hired ex-employee to work in violation of terms of restrictive covenant). 5 No. 95-2928.ssa ¶69 As this court has recognized, "[a] principal argument against giving effect to reasonable aspects of a restraint is that the 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." Streiff, 118 Wis. 2d at 614 (citing Harlan M. Blake, Employee Agreements Not to Compete, 73 Harv. L. Rev. 625, 682 (1960)). The Streiff decision relied on the legislative history of Wis. Stat. § 103.465, including Representative Peterson's letter. The majority opinion ignores this legislative history. ¶70 employee The majority when an opinion employer places asks the all the risk employee on an to sign a nondisclosure agreement even though the employer has drafted the agreement and has the superior bargaining power. It seems to me that the fairness considerations set forth in the language and legislative history to Wis. Stat. § 103.465 require that some of the risks relating to the legality of the agreement should be placed on the employer who drafted the agreement and seeks to impose it. Ensuring that the employer and the employee share the risk comports with the legislature's instruction "as to the equities between the parties." ¶71 Streiff, 118 Wis. 2d at 614. Thus I conclude that the public policy of this state as reflected in Wis. Stat. § 103.465 requires that an employer who terminates employment of an at-will employee based on the employee's refusal to sign a nondisclosure agreement is liable for wrongful discharge if a court decides the agreement is void. 6 No. 95-2928.ssa ¶72 For the foregoing reasons, I dissent. ¶73 I am authorized to state Bradley joins this dissent. 7 that Justice Ann Walsh No. 95-2928.ssa 1
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