Behnke v. Hertz Corp.

• Decision Date: 10 December 1975
• Docket Number: No. 606,606
• Citation: 235 N.W.2d 690,70 Wis.2d 818
• Parties: Marvin A. BEHNKE, d/b/a National Car Rental System, Respondent, v. The HERTZ CORPORATION and Keith A. Mott, Appellants. (1974).
• Court: Wisconsin Supreme Court

Page 690

235 N.W.2d 690

70 Wis.2d 818

Marvin A. BEHNKE, d/b/a National Car Rental System, Respondent, v. The HERTZ CORPORATION and Keith A. Mott, Appellants.

No. 606 (1974).

Supreme Court of Wisconsin.

Dec. 10, 1975.

Thomas W. Godfrey, Godfrey & Trump, Milwaukee, for appellants.

Victor M. Harding, Whyte & Hirschboeck, Milwaukee, for respondent.

HEFFERNAN, Justice.

The case arises from a restrictive employment contract, the breach of which, it is alleged, was induced by the Hertz Corporation. From a judgment awarding $982.26 compensatory damages and $10,000 punitive damages to the plaintiff, Marvin A. Behnke, d/b/a National Car Rental System, the Hertz Corporation and Keith A. Mott, a Hertz employee, have appealed.

We conclude that the restrictive employment contract was invalid as a matter of law; and, accordingly, the case ought not to have been submitted to the jury, and the complaint of the plaintiff must be dismissed.

The facts of record show that Barbara A. Kreft was hired as a counter girl by the National Car Rental System, which had a place of business only at the Milwaukee airport. At the time of her hiring, she signed an agreement with National, which, in the part pertinent to this appeal, provided:

'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.'

The National Car Rental business in Milwaukee is affiliated with a national franchise operation. The franchise for the city of Milwaukee is owned by the plaintiff, Marvin A. Behnke. Barbara Kreft worked for Behnke at the car rental operation at the airport from May 26, 1972, until November 20, 1972. On that date she informed Betty Behnke, who managed the business for her husband, that she intended to terminate her employment with National; and on or about the same day Barbara Kreft commenced working for the Hertz rent-a-car service at their railroad-depot location.

Because of the conduct of Hertz in allegedly inducing the breach of the employment contract, National sought damages from Hertz.

While it is alleged that the Hertz Corporation maliciously induced the termination of the contract, Hertz's conduct is irrelevant if the contract itself is void as being unreasonable. We conclude that it is.

The validity of the contract is controlled by sec. 103.465, Stats.:

'103.465 Restrictive covenants in employment contracts. A covenant by an assistant, servant or agent not to compete with his employer or principal 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.'

While that statute is controlling, the question which must be resolved under the terms of the statute is whether 'the restrictions imposed are reasonably necessary for the protection of the employer or principal.' Richards, in an exhaustive and scholarly treatment, Drafting and Enforcing Restrictive Covenants Not to Compete, 55 Marquette Law Rev. 241 (1972), points out that the statute is based almost completely upon the pre-existing structure of the common law as established in Wisconsin and elsewhere.

Contracts in restraint of trade are universally looked upon with disfavor by the common law; and as the Restatement, 2 Contracts, sec. 513, page 987, provides:

'A bargain is in restraint of trade when its performance would limit competition in any business or restrict a promisor in the exercise of a gainful occupation.'

However, as sec. 516 of the Restatement, 2 Contracts, points out, an agreement in restraint of trade is not unreasonable in some circumstances. Section 516(f), page 996, finds not unreasonable as a restraint of trade:

'A bargain by an assistant, servant, or agent not to compete with his employer, or principal, during the term of the employment or agency, or thereafter, within such territory and during such time as may be reasonably necessary for the protection of the employer or principal, without imposing undue hardship on the employee or agent.'

Comment h on clause (f) of the Restatement, 2 Contracts, sec. 516, page 1001, provides:

'h. A promise of a former employee will not ordinarily be enforced so as to preclude him from exercising skill and knowledge acquired in his employer's business, even if the competition is injurious to the latter, except so far as to prevent the use of trade secrets or lists of customers, or unless the services of the employee are of a unique character.'

The contract here does not conform to those standards of reasonableness. Barbara Kreft's services were not unique in nature; there were to trade secrets involved; and, unlike a route man or a salesman on the road, there were no lists of customers that she could use subsequently for her own benefit or to the detriment of her employer. Accordingly, no contract limiting the future right of employment of Barbara Kreft, irrespective of either the space or time duration requirements of the contract, could be valid. Her services were not of a...