author: WILLIAM A. BABLITCH, J. SHIRLEY S. ABRAHAMSON, CHIEF JUSTICE

text:
    Heyde Companies, Inc., d/b/a Greenbriar Rehabilitation, Plaintiff-Respondent-Petitioner, v. Dove Healthcare, LLC, d/b/a Dove Healthcare at Eau Claire, a Wisconsin Limited Liability Company, Defendant-Appellant.
    Supreme Court

      No. 01-0863-FT.

      Oral argument September 10, 2002.

    Decided December 27, 2002.

    2002 WI 131
    (Also reported in 654 N.W.2d 830.)

      For the plaintiff-respondent-petitioner, there were briefs by John F. Maloney, Robert K. Bultman and McNally, Maloney & Peterson, S.C., Milwaukee and oral argument by Robert K. Bultman.

    For the defendant-appellant, there was a brief by Carol S. Dittmar, Teresa E. O'Halloran and Garvey, Anderson, Johnson, Geraci & Mirr, S.C., Eau Claire and oral argument by Carol S. Dittmar.

   WILLIAM A. BABLITCH, J.

¶ 1. Heyde Companies, Inc. petitions this court to review a decision of the court of appeals, which reversed the judgment of the circuit court for Eau Claire County, Eric J. Wahl, Judge. The court of appeals held that an employee's individual right and freedom to contract may not be restricted by a contract between two employers unless the employee is aware of and consents to such a restriction. We agree. A no-hire provision agreed to by employers that restricts the employment opportunities of employees without their knowledge and consent constitutes an unreasonable restraint of trade, in violation of Wis. Stat. § 103.465 (restrictive covenants) and the public policy of the state. Accordingly, we hold that the no-hire provision contained in the agreement between Green-briar and Dove is unenforceable.

¶ 2. Dove Healthcare, LLC (Dove) is a health care provider that operates nursing homes. Heyde Companies, Inc. (Heyde) owns Greenbriar Rehabilitation (Greenbriar), which furnishes physical therapists to nursing home facilities. In June 1997, Dove and Green-briar entered into a Therapy Services Agreement (Agreement), whereby Greenbriar was to provide physical rehabilitation services and place physical therapists at Dove's Eau Claire facility. Although the physical therapists worked at Dove's facility, they remained at-will employees of Greenbriar.

¶ 3. The Agreement between Dove and Green-briar contained a "no-hire" provision, which stated in relevant part:

[Dove] acknowledges and agrees that it will not, directly or indirectly, solicit, engage, permit to be engaged or hire any Greenbriar therapists or therapist assistants to provide services for [Dove] independently, as an employee of [Dove] or as an employee of a services provider other than Greenbriar or otherwise during the term of this Agreement. ... and for a period of one (1) year thereafter without the prior written consent of Greenbriar. If, after prior written consent by Green-briar, any Greenbriar therapists or therapist assistants are hired or utilized by [Dove], [Dove] shall pay Green-briar a fee of fifty percent (50%) of the subject Green-briar employee's annual salary.

¶ 4. On October 26, 1999, Dove terminated its Agreement with Greenbriar, effective December 31, 1999. Shortly after terminating the Agreement, Dove hired one current and three former Greenbriar employees. Dove did not seek Greenbriar's written consent, nor did it pay 50% of the employees' salaries in accordance with the no-hire provision.

¶ 5. The employees hired by Dove testified in their affidavits that they did not know about the no-hire provision in the Agreement between Greenbriar and Dove that placed restrictions on their ability to be employed by Dove. Some of the employees hired by Dove testified that they inquired whether they would be bound by a non-compete agreement and were told by Greenbriar that they would not be subject to such restrictions.

¶ 6. In 1999, Greenbriar had contracts with approximately 35 nursing home facilities, including Dove, and employed approximately 33 therapists out of the 273 therapists who worked in the Eau Claire/Chippewa Falls area. Greenbriar primarily contracted with facilities located in the Eau Claire/Chippewa Falls area, although it also had contracts with a few facilities in the eastern part of the state.

¶ 7. Greenbriar filed suit against Dove on March 10, 2000, alleging that Dove breached the no-hire provision in the Agreement and sought payment of the 50% contractual fee for the Greenbriar employees who were hired by Dove. Dove moved for summary judgment, claiming that the no-hire provision was unenforceable and an unlawful restraint of trade. The circuit court denied Dove's motion for summary judgment. Greenbriar and Dove stipulated to findings of fact on liability and presented evidence on the issue of damages. The circuit court entered a judgment in favor of Greenbriar and awarded Greenbriar liquidated damages in the amount of $62,124.40.

¶ 8. Dove appealed the circuit court's decision. On October 23, 2001, the court of appeals reversed the judgment of the circuit court and held that the no-hire provision was an unreasonable restraint of free trade because the employees had no knowledge of the provision and did not sign any covenant not to compete. Greenbriar petitioned this court for review.

¶ 9. At issue is whether a no-hire provision contained in a contract between employers, without the knowledge and consent of the affected employees, is unenforceable as an unreasonable restraint of trade. Determining whether no-hire provisions are enforceable is a question of law. This court reviews questions of law de novo, benefiting from the analyses of the circuit court and court of appeals. In re Corey J.G., 215 Wis. 2d 395, 405, 572 N.W.2d 845 (1998).

¶ 10. In general, parties are free to contract as they see fit, provided that the contract does not impose obligations that are contrary to public policy. Journal/Sentinel, Inc. v. Pleva, 155 Wis. 2d 704, 710-11, 456 N.W.2d 359 (1990). Public policy may be expressed by statute, administrative regulation, or by the court's expression of the policy of the common law. N. States Power Co. v. Nat'l Gas Co., 2000 WI App 38, 232 Wis. 2d 541, 545-46, 606 N.W.2d 613 (Ct. App. 1999) (citing Pedrick v. First Nat'l Bank, 267 Wis. 436, 438-39, 66 N.W.2d 154 (1954); M&I First Nat'l Bank v. Episcopal Homes, 195 Wis. 2d 485, 507, 536 N.W.2d 175 (Ct. App. 1995); Hawkins Realty Co. v. Hawkins State Bank, 205 Wis. 406, 417, 236 N.W 657 (1931)). In analyzing the enforceability of a no-hire provision, we review Wis. Stat. § 103.465(1999-2000), which deals with restrictive covenants in employment contracts.

I — 1

¶ 11. Section 103.465 was enacted in response to Fullerton Lumber Co. v. Torborg, 270 Wis. 133, 70 N.W.2d 585 (1955), where the court enforced an invalid covenant not to compete insofar as it was reasonable. Id. at 147. The court in Fullerton Lumber held that the 10-year period prescribed under the restraint in question was unreasonable, but that a 3-year period was reasonable; accordingly, the court upheld the covenant for a 3-year period. Id. The legislature disagreed with this analysis and enacted § 103.465 in order to invalidate overly broad covenants in their entirety, and not allow courts to give effect to invalid covenants even to the extent that they are reasonable. Streiff v. Am. Family Mut. Ins. Co., 118 Wis. 2d 602, 608, 348 N.W.2d 505 (1984). Under § 103.465, "Any covenant, described in this subsection, 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."

¶ 12. Greenbriar argues that Wis. Stat. § 103.465 was enacted to protect employees, who often have unequal bargaining power, from unreasonable covenants not to compete with their employers. Greenbriar asserts that, on its face, § 103.465 only applies to restrictive covenants between employers and their employees, and not agreements between employers.

¶ 13. Wisconsin Stat. § 103.465 is broadly entitled "Restrictive covenants in employment contracts," although it only refers to covenants between employers and employees. While a covenant not to compete is typically made between an employer and its employees, it is possible, as illustrated in this case, that a restrictive covenant may be made between employers that acts as a covenant not to compete on the employees. Greenbriar argues that § 103.465 does not apply in this case because the no-hire provision was agreed to by Greenbriar and Dove, not Greenbriar and its employees. However, the explicit purpose of § 103.465, as plainly stated in the statute, is to invalidate covenants that impose unreasonable restraints on employees. This court has recognized that § 103.465 essentially deals with restraint of trade and has held that the statute applies regardless of whether a restriction is labeled a "non-disclosure" provision or a "covenant not to compete." Tatge v. Chambers & Owen, Inc., 219 Wis. 2d 99, 111-12, 579 N.W.2d 217 (1998); see also Gary Van Zeeland Talent, Inc. v. Sandas, 84 Wis. 2d 202, 218-20, 267 N.W.2d 242 (1978). In Tatge, this court reasoned that "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." Tatge, 219 Wis. 2d at 112.

¶ 14. Similarly, the fact that Greenbriar attempts to restrict its employees through a no-hire provision with Dove instead of a restrictive covenant with its employees does not change the underlying analysis. The effect of the no-hire provision is to restrict the employment of Greenbriar's employees; it is inconsequential whether the restriction is termed a "no-hire" provision between Dove and Greenbriar or a "covenant not to compete" between Greenbriar and its employees. Greenbriar is not allowed to accomplish by indirection that which it cannot accomplish directly. For example, in holding that a state statute violated the 13th Amendment of the U.S. Constitution, the U.S. Supreme Court reasoned that "What the state may not d.o directly it may not do indirectly. . . . [An] act of Congress deprives of effect all legislative measures of any state through which, directly or indirectly, the prohibited thing. . . may be established or maintained . . . ." Bailey v. Alabama, 219 U.S. 219, 244-45 (1911) (emphasis added). Likewise, in analyzing a state tax statute, the Court stated that the "statute seeks to accomplish by indirection that which the state is constitutionally prohibited from doing directly. Such attempted evasion of the Government's constitutional immunity from state taxation cannot legally be permitted to succeed." United States v. City of Detroit, 355 U.S. 466, 478-79 (1958). This court has also recognized that "[t]here is no doubt of the general truth, that, in questions of this nature [constitutionality of a statute], the means are not to be regarded, but only the end, and that the restraints of the fundamental law cannot be avoided by indirection." State ex rel. Haswell v. Cram, 16 Wis. 343, 345 (1863).

¶ 15. In addition, it is well-established under statutory canons of construction that social legislation and statutes promoting a public interest are to be liberally construed in favor of those intended to benefit from them. See, e.g., Paikoff v. Harris, 185 Misc.2d 372, 377 (N.Y. App. Term 1999); Indiana v. Kokomo Tube Co., 426 N.E.2d 1338, 1345 (Ind. Ct. App. 1981). In the context of penal statutes, this court has held that "if strict construction thwarts the purpose of the legislation, the rule of strict construction does not apply" and that the "dominating purpose of all [statutory] construction is to carry out the legislative purpose." German v. Wisconsin Dep't of Transp., 2000 WI 62, ¶ 27, 235 Wis. 2d 576, 612 N.W.2d 50 (citing State v. Kittilstad, 231 Wis. 2d 245, 262, 603 N.W.2d 732 (1999); State v. Robe, 96 Wis. 2d 48, 70, 291 N.W.2d 809 (1980)). We therefore find unpersuasive Greenbriar's argument that the statute on its face does not apply.

¶ 16. It cannot be disputed that this no-hire provision acts as a restrictive covenant on Greenbriar's employees. Therefore, to determine its enforceability, we employ the five-factor analysis that is used to evaluate covenants not to compete. Lakeside Oil Co. v. Slutsky, 8 Wis. 2d 157, 162-63, 98 N.W.2d 415 (1959). A restrictive covenant must: (1) be necessary to protect the employer; (2) provide a reasonable time limit; (3) provide a reasonable territorial limit; (4) not be harsh or oppressive to the employee; and (5) not be contrary to public policy. Id.; see also Streiff 118 Wis. 2d at 613 n.5. In addition, the following canons of construction are applied 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. Streiff, 118 Wis. 2d at 610-11 (citing Zimmerman v. Brennan, 78 Wis. 2d 510, 514-15, 254 N.W.2d 719 (1977); Gary Van Zeeland Talent, 84 Wis. 2d at 218-19).

¶ 17. Greenbriar argues that the no-hire provision satisfies the first factor because it is necessary for protecting its interest in maintaining its employees, and to avoid serving as an involuntary employment recruiting agency for Dove. Although some kind of restriction might be necessary, Greenbriar can adequately protect itself through a reasonable covenant not to compete that complies with Wis. Stat. § 103.465. Therefore, contrary to Greenbriar's claim, the no-hire provision with Dove is not necessary for its protection.

¶ 18. With respect to the second factor, the one-year time limit seems reasonable.

¶ 19. With respect to the third factor, the territorial restriction in this case is potentially problematic. Greenbriar acknowledges that it has contracts with other nursing home facilities, in addition to Dove, which contain the same no-hire provision. Consequently, the employment opportunities of Greenbriar's employees are restricted not only with respect to Dove, but also with respect to all of the other facilities that have contracts with Greenbriar. In fact, Greenbriar is seeking damages from Dove for an employee who never even worked at the Dove facility. In 1999, Greenbriar had contracts with approximately 35 facilities, including Dove, throughout Wisconsin. The no-hire provision restricts Greenbriar's employees with respect to all of these facilities, which is arguably an unreasonable territorial restriction. Greenbriar does not dispute that these facilities would have to pay the 50% fee if any of them wanted to hire a Greenbriar employee, but it claims that there is no evidence that Greenbriar therapists would be less likely to be hired because of the fee. We cannot agree. It is apparent that a nursing home facility would prefer to hire therapists who are not subject to a 50% salary "fee" that must be paid to a former employer, thereby putting the Greenbriar therapists at a disadvantage in obtaining employment.

¶ 20. Notwithstanding whether the territorial restriction of the no-hire provision is reasonable, with respect to the fourth and fifth factors, it is clear that the no-hire provision is harsh and oppressive to Greenbriar's employees and is contrary to public policy. The former Greenbriar employees who were hired by Dove testified that they had no knowledge of the no-hire provision and that Greenbriar did not ask them to sign a non-compete agreement. One of the employees hired by Dove testified that she specifically asked Greenbriar whether she would be bound by a non-compete agreement and was told that she would not be subject to such restrictions. The court of appeals has held that a valid covenant not to compete requires knowledge and consideration by the affected employee. NBZ, Inc. v. Pilarski, 185 Wis. 2d 827, 835-36, 520 N.W.2d 93 (Ct. App. 1994). This court has also implicitly recognized the necessity of consideration in referencing an employee's decision to sign a covenant not to compete that he or she deems unreasonable. Tatge, 219 Wis. 2d at 116.

¶ 21. Greenbriar is not prevented from protecting its interest in maintaining its employees, but it must do so through a valid restrictive covenant in compliance with Wis. Stat. § 103.465. Greenbriar is not allowed to circumvent the protections under § 103.465 by restricting the employment opportunities of its employees through contracts with other employers without their employees' knowledge and consent. An employer cannot indirectly restrict employees in a way that it cannot do directly under § 103.465. At the very least, § 103.465 requires that employees know that they are subject to a restrictive covenant and that they consent to such a restriction. Accordingly, the no-hire provision, which restricts Greenbriar's employees without their knowledge and consent, is harsh and oppressive to the employees and is contrary to public policy, in violation of§ 103.465.

¶ 22. Furthermore, the fundamental right of a person to make choices about his or her own employment is well-established. "[N]o one has the legal right... to deprive a person of the right to labor for whomsoever he will, with the consent of such other." Cheek v. Prudential Ins. Co. of America, 192 S.W. 387, 393 (Mo. 1916); aff'd by Prudential Ins. Co. v. Cheek, 259 U.S. 530, 547-48 (1922) ("[Corporations had no lawful right to enter into a combination or agreement the effect of which was to . . . deprive former employees of their constitutional right to seek employment."). According to the U.S. Supreme Court, an individual's right to make choices about his or her own employment may not be negated by business decisions that circumscribe the employment relationship.

That freedom in the making of contracts of personal employment, by which labor and other services are exchanged for money or other forms of property, is an elementary part of the rights of personal liberty and private property....
But the right to conduct business . .. and as such to enter into relations of employment with individuals, is not a natural or fundamental right... and a State in authorizing its own corporations ... may qualify the privilege by imposing such conditions and duties as reasonably may be deemed expedient in order that the corporation's activities may not operate to the detriment of the rights of others [i.e. employees] with whom it may come in contact."

Cheek, 259 U.S. at 536.

¶ 23. Thus, the no-hire provision between Green-briar and Dove is unenforceable because it is harsh and oppressive to the employees, is against public policy, and goes beyond what is necessary for Greenbriar to protect its legitimate interest in protecting the investment it has in its employees. Greenbriar is essentially attempting to enforce a covenant not to compete, which it is allowed to do, but the restriction must be reasonable in accordance with the requirements under Wis. Stat. § 103.465.

¶ 24. In addition, the few cases from other jurisdictions that have upheld no-hire provisions are distinguishable from the case at bar. Greenbriar points out that the Virginia Supreme Court has addressed the same issue and held that a no-hire provision between employers was enforceable and not against public policy. Therapy Serv., Inc. v. Crystal City Nursing Ctr., Inc., 389 S.E.2d 710 (Va. 1990). The court in Therapy Services analyzed whether the no-hire provision constituted an unreasonable restraint of trade under antitrust principles. Importantly, the court concluded that the "restriction is reasonable .. . because it does not in any way inhibit the affected employees from seeking employment as therapists with any employer other than Crystal City." Id. at 712. In this case, the employment opportunities of the Greenbriar employees are restricted with respect to all of the facilities that Greenbriar has a contract with, even if an employee has never worked at any of the other facilities except for Dove. Similarly, in Webb v. West Side Dist. Hosp., 144 Cal. App. 3d 946 (Cal. App. 1983), the court upheld a no-hire provision because it was limited to the physicians who had been placed at the hospital by Webb. The court reasoned that the clause was not unreasonable because it did not include physicians employed by Webb who had never actually worked at the hospital, (distinguishing Hospital Consultants, Inc. v. Potyka, 531 S.W.2d 657, 665 (Tex. Civ. App. 1975), which held that a no-hire provision was unenforceable because it went beyond what was necessary to protect Potyka's interest by restricting physicians who had never worked at the hospital).

II

¶ 25. Notwithstanding whether the no-hire provision between Greenbriar and Dove is a facial violation of Wis. Stat. § 103.465, the provision nonetheless clearly violates the public policy of the state as expressed through the common law and § 103.465 for all the reasons stated above. As discussed in section I, the no-hire provision agreed to by Greenbriar and Dove unquestionably constitutes harsh treatment to Greenbriar's employees since the employees were not aware that they would be subject to this kind of a restriction when they decided to take a job with Green-briar. Consequently, the no-hire provision in this case constitutes an unreasonable restraint of trade in contravention of Wisconsin's public policy. As this court has stated, if a "contract is void for ... reasons, such as public policy... or creates an undue hardship on the employee a court of equity will not enforce it." Lakeside Oil, 8 Wis. 2d at 162.

¶ 26. In sum, the no-hire provision in the Agreement between Greenbriar and Dove is an unreasonable restraint of trade and went beyond what was necessary for Greenbriar to protect its interest in maintaining its employees. Greenbriar can adequately protect its interest through a reasonable restrictive covenant in accordance with Wis. Stat. § 103.465. A no-hire provision that restricts the employment opportunities of employees without their knowledge and consent is harsh and oppressive to the employees, in violation of Wis. Stat. § 103.465 and the public policy of the state. Accordingly, we hold that the no-hire provision in this case is unenforceable.

By the Court. — The decision of the court of appeals is affirmed.

SHIRLEY S. ABRAHAMSON, CHIEF JUSTICE

¶ 27. (concurring). I agree with the dissent that the no-hire provision in the contract at issue in the present case is not directly governed by Wis. Stat. § 103.465 (1999-2000).

¶ 28. The plain language of Wis. Stat. § 103.465 limits its scope to covenants "by an assistant, servant or agent not to compete with his or her employer or principal." The contract at issue was not made by an assistant, servant, or agent and the employer. Rather, it was between two employers, restricting one employer's ability to hire former employees of the other employer. By this indirection, the employees' future opportunities of employment were restricted.

¶ 29. Section 103.465 does not, however, occupy the field of contracts in restraint of trade. Section 103.465 expresses a distinct legislative policy of discouraging certain covenants not to compete as an unreasonable restraint of trade.

¶ 30. The common law of the state survives the enactment of § 103.465. According to the common law of this state, unreasonable restraints of trade, including contracts unreasonably restricting employment of former employees, are contrary to public policy and void.

¶ 31. I write separately to explain that the no-hire contract in the present case severely restricts future employment opportunities of employees without their knowledge or consent. People agreed to work as Greenbriar's at-will employees (meaning they were free to leave employment at any time and Greenbriar was free to terminate their employment at any time for almost any reason). When the at-will employment ceased, the former Greenbriar employees would find, to their surprise, that they were handicapped in getting new employment by a secret deal between Greenbriar and another business.

¶ 32. I agree with the court of appeals: "The no-hire provision violates public policy by restricting Greenbriar therapists the right to freely sell their skills in the labor market. Without signing any agreement or even being given notice . . . current and former Green-briar therapists are restricted from being employed by these facilities, unless Greenbriar gives consent and unless the facilities are willing to pay the fee."

¶ 33. To assert that Greenbriar's employees are not "unreasonably restricted or otherwise hurt by the no-hire clause in the contract between Greenbriar and Dove" is to ignore the harsh realities of the job market. The dissent asks, "Why should Dove, which freely agreed to pay the 50 percent premium if it hired a Greenbriar employee, be entitled to avoid its contractual obligations by asserting that someone else has sustained a purely hypothetical injury?" The law of this State answers this question: freedom to contract, like other freedoms, has limitations.

¶ 34. The limitation on the freedom to contract in the present case is the public's interest in not allowing businesses to unduly and unfairly limit the ability of former employees to seek new employment. It is an unfair and an undue limitation on an employee's right to seek employment for an employer to contract away an employee's freedom of future employment without that employee's ever knowing about or consenting to the limitation. Employees should be able to decide whether they want to work for Greenbriar under these conditions. The secret deal cut in the present case between two businesses affecting non-consenting employees is unduly harsh and oppressive to the employees and is therefore contrary to the common law and public policy of the state of Wisconsin.

¶ 35. For the foregoing reasons, I concur in affirming the decision of the court of appeals.

¶ 36. DIANE S. SYKES, J. (dissenting). I respectfully dissent. The majority invalidates the contract at issue in this case, primarily on the basis of a statute that does not apply to contracts of this type, and, secondarily, on the basis of the public policy expressed in the inapplicable statute.

¶ 37. The majority analyzes this case as though it were a lawsuit between an employer and a former employee, but it is not. It is a breach of contract lawsuit between two sophisticated businesses. The contract is in writing and was freely entered into with no suggestion of undue influence or unequal bargaining power. One party has admittedly breached the contract and is now attempting to invoke statutory and public policy arguments that belong to employees, not businesses, in an attempt to avoid liability for the breach. The majority, like the court of appeals, has fallen for this subterfuge, and in so doing, has created a rule of law that effectively prevents companies in this state from achieving any contractual protection for their investments in employee recruitment and training against raids by their customers.

¶ 38. The majority concludes that the no-hire provision in the contract between Greenbriar Rehabilitation and Dove Healthcare violates Wis. Stat. § 103.465 and is therefore unenforceable. The statute, however, appears in the chapter entitled "Employment Regulations," and by its terms applies only to restrictive covenants in employment contracts:

Restrictive covenants in employment contracts
A covenant by an assistant, servant or agent not to compete with his or her employer or principal during the term of the employment or agency, or after the termination of that employment or agency, 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 covenant, described in this subsection, 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 (emphasis added).

¶ 39. The Greenbriar/Dove contract is plainly not an employment contract. It is not a "covenant by an assistant, servant or agent not to compete with his or her employer" within the meaning of Wis. Stat. § 103.465. It is a contract between two businesses for the provision of professional services. The majority dismisses this distinction as "inconsequential." Majority op., ¶ 14. To the contrary, it is dispositive. The statute does not apply.

¶ 40. Dove contracted to receive rehabilitation therapy services from Greenbriar, and in so doing, agreed not to hire Greenbriar's employees, without Greenbriar's consent, for a specified term (while the contract for rehabilitation services was in effect and for one year thereafter). Dove further agreed to pay a specified penalty (50 percent of the employee's annual salary) if it hired a Greenbriar employee.

¶ 41. The majority states categorically: "[i]t cannot be disputed that this no-hire provision acts as a restrictive covenant on Greenbriar's employees." Majority op., ¶ 16. Well, yes, it can, because the truth is exactly the opposite: what is actually undisputed and undisputable here is that the no-hire clause did not bind or restrict Greenbriar's employees in any way. It imposed no territorial or other restriction whatsoever on where or with whom they might seek or obtain employment.

¶ 42. Greenbriar's at-will employee therapists were thus perfectly free to leave Greenbriar at any time and sell their services anywhere in the marketplace, even in competition with Greenbriar, and even to Greenbriar's customers. Greenbriar's customer, Dove, was contractually required to obtain Greenbriar's consent should it wish to hire any Greenbriar employee, and further required to compensate Greenbriar according to the terms of the contract if it did so. The no-hire provision conferred rights and imposed obligations on supplier and customer, not employer and employee. It therefore cannot be construed to be — or even to "act as" — an employee covenant not-to-compete of the type governed by Wis. Stat. § 103.465. See Majority op., ¶¶ 13, 16.

¶ 43. That the no-hire clause made Greenbriar's employees somewhat more difficult and expensive for Dove to hire does not trigger the application of Wis. Stat. § 103.465 or otherwise transform this business agreement into an employment contract for purposes of determining the statute's applicability. Greenbriar employed 33 therapists in the Eau Claire/Chippewa Falls region. There were 273 therapist jobs in the area, giving Greenbriar a market share of approximately 12 percent. Clearly, the nursing facilities that were Greenbriar's customers — including Dove — represent only a small fraction of the marketplace for therapists in the Eau Claire/Chippewa Falls area.

¶ 44. The majority states that the "explicit purpose" of the statute is "to invalidate covenants that impose unreasonable restraints on employees." Majority op., ¶ 13. Actually, the statute states that "[a]ny covenant, described in this section, imposing an unreasonable restraint is illegal, void and unenforceable . . .." Wis. Stat. § 103.465 (emphasis added). If a covenant is not one that is described in the subsection (that is, a covenant between an employer and employee), it cannot possibly violate the statute or otherwise implicate the statute's purpose.

¶ 45. The majority states that "Greenbriar is not allowed to accomplish by indirection that which it cannot accomplish directly." Majority op., ¶ 14. If by this the majority means that the no-hire provision is essentially the equivalent of an employee non-compete covenant, it is simply incorrect, for the reasons noted above. The contract between Greenbriar and Dove did not in any way bind Greenbriar's employees or prohibit their freedom of movement in the employment marketplace. It merely imposed a financial obligation on Greenbriar's client, Dove, should it wish to hire a Greenbriar employee.

¶ 46. There is another problem with the majority's statement that the no-hire provision attempts to "accomplish by indirection that which it cannot accomplish directly": it premises the determination of the statute's threshold applicability on a conclusion that it has been violated. This is odd reasoning, a little like saying "the statute governs employment agreements, which this obviously is not, but if it were, it would violate the statute, and therefore the statute must apply."

¶ 47. The majority relies on Tatge v. Chambers & Owen, Inc., 219 Wis. 2d 99, 579 N.W.2d 217 (1998), and Gary Van Zeeland Talent, Inc. v. Sandas, 84 Wis. 2d 202, 267 N.W.2d 242 (1978), but those cases concerned restrictive covenants contained in employment agreements, which, unlike the agreement at issue here, are squarely within the statute.

¶ 48. The majority also relies on broad language from several older cases regarding state statutes that "indirectly" contravene the constitution. Majority op., ¶ 14. These cases are. limited to constitutional violations, and do not support the notion that a party can avoid liability for breach of contract by invoking an inapplicable statute or alleging a violation of the rights of third parties who have suffered no injury. In any event, there is no constitutional argument present here.

¶ 49. Also, and perhaps most importantly, the scope of the majority's direction/indirection holding is uncertain. The majority places no limits on it, and so its sweep is potentially quite broad. Is it true that henceforward courts will have the authority to declare that a facially inapplicable statute nevertheless applies because it has been violated "by indirection"? This seems rather revolutionary.

¶ 50. If the statute does not apply, then the expression of public policy contained in it cannot possibly be implicated. The majority correctly notes that the statute was enacted in response to Fullerton Lumber Co. v. Torborg, 274 Wis. 478, 80 N.W.2d 461 (1957), and was intended to protect employees from those employers who, because of their superior bargaining power, could impose unreasonable and excessively restrictive non-compete covenants in employment agreements. Streiff v. American Family Mut. Ins. Co., 118 Wis. 2d 602, 608-09, 348 N.W.2d 505 (1984). That public policy is not implicated in a contract between two businesses such as the one at issue here.

¶ 51. Again, Greenbriar's employees are not unreasonably restricted or otherwise hurt by the no-hire clause in the contract between Greenbriar and Dove. Indeed, Dove hired Greenbriar's employees despite the no-hire clause. Nonetheless, the majority now concludes that a purely theoretical injury to Greenbriar's employees (which hardly rises to the level of an unreasonable or excessive restraint) somehow excuses Dove's liability for its breach of contract.

¶ 52. The majority's analysis of the no-hire provision under the five-part test for a valid employee non-compete under Wis. Stat. § 103.465 is also questionable. The majority concludes that the no-hire provision was unnecessary for the protection of the employer because the employer could have protected its investment by entering into non-compete agreements with its employees instead. Majority op., ¶ 17. Greenbriar's therapists were at-will employees. From the employees' standpoint (and the statute is intended to protect the interests of employees), how could an employee non-compete agreement possibly be considered an improvement over a no-hire agreement? In Tatge, the plaintiff, an at-will employee, was fired for refusing to sign a non-compete/non-disclosure agreement, and this court said he had no recourse. Tatge, 219 Wis. 2d at 123. An employee non-compete would restrict the employee's freedom of movement in the marketplace; the no-hire agreement between Green-briar and Dove does not.

¶ 53. Furthermore, the majority's evaluation of the necessity of the covenant appears to rest entirely on its conclusion that it is unreasonable. This is circular. The necessity (or lack thereof) of the covenant is one measure of its reasonableness under the test. The majority is basically saying that the covenant is unnecessary because it is unreasonable, therefore it is unreasonable because it is unnecessary.

¶ 54. The majority also concludes that the no-hire provision contains an "arguably . . . unreasonable territorial restriction," which is "potentially problematic." Majority op., ¶ 19. First of all, there are "arguable" or "potentially problematic" issues in every case; our job is to resolve the argument or problem one way or the other.

¶ 55. More importantly, the no-hire provision does not contain a territorial restriction at all; it only prohibits Dove from hiring Greenbriar's employees without consent and without paying a fee. That Greenbriar's contracts with its other customers contained similar no-hire clauses does not operate to create a "territorial restriction" for purposes of Wis. Stat. § 103.465, and certainly does not amount to an "unreasonable territorial restriction," considering that Greenbriar's area market share for therapists was only 12 percent.

¶ 56. On this point, the majority also notes the obvious — that nursing homes would prefer to hire therapists without having to pay a 50 percent premium —and then concludes that this puts Greenbriar's employees "at a disadvantage in obtaining employment," which apparently is unacceptable. Majority op., ¶ 19. By this measure, all no-hires and non-competes are per se unreasonable, because they always result in some competitive disadvantage to the relevant employees. The real question is, how much is too much? The majority does not say.

¶ 57. The majority also concludes that the no-hire provision is "harsh and oppressive to Greenbriar's employees and is contrary to public policy" because it was entered into without the employees' knowledge and consent and without consideration to the employees. Majority op., ¶ 20. Is the majority actually suggesting that an employee — every employee — has a veto, and a right to consideration, whenever his or her employer negotiates a contract with a customer that includes a no-hire clause? Why should Dove, which freely agreed to pay the 50 percent premium if it hired a Greenbriar employee, be entitled to avoid its contractual obligations by asserting that someone else has sustained a purely hypothetical injury?

¶ 58. The majority's reliance on Cheek v. Prudential Ins. Co. of America, 192 S.W 387 (Mo. 1916), aff'd Prudential Ins. Co. v. Cheek, 259 U.S. 530 (1922) is strained. The defendant insurance companies in that case had a complete monopoly — 100 percent market share — and agreed among themselves not to hire each other's employees. An outright prohibition of hiring across an entire market that operates, therefore, as a complete deprivation of the right to seek employment is a far cry from the facts of this case, in which hiring is merely burdened by a fee and 88 percent of the market remains completely open.

¶ 59. The majority's analysis of this case essentially makes all no-hire provisions unenforceable. The majority opinion therefore deprives companies in this state of the ability to contractually protect their investments in employee recruitment and training against poaching by their customers.

¶ 60. To the extent that Dove relies on broader arguments under Wis. Stat. § 133.01, which the majority does not address, its attempt to invalidate the no-hire provision must also fail. Wisconsin Statute § 133.01, Wisconsin's equivalent of section 1 of the Sherman Antitrust Act, declares contracts in restraint of trade illegal, and has been interpreted consistently with the "rule of reason" in federal antitrust law, to prohibit only unreasonable restraints of trade. Independent Milk Producers Co-op v. Stoffel, 102 Wis. 2d 1, 7, 298 N.W.2d 102 (Ct. App. 1980). Reasonableness is determined by reference to the purpose of the restraint, the market power of the party who benefits from the restraint, and the anticompetitive effect of the restraint. Grams v. Boss, 97 Wis. 2d 332, 348, 294 N.W.2d 473 (1980).

¶ 61. In Wisconsin, non-compete agreements between businesses (as contrasted with employer/employee non-competes) have been evaluated on the basis of a three-part test for reasonableness: 1) is the agreement reasonably necessary for the protection of the beneficiary; 2) is it reasonable as between the parties, considering the time, space, purpose and scope of the agreement; and 3) is it specially injurious to the public? Reiman Assoc, v. R/A Adven, Inc., 102 Wis. 2d 305, 309, 306 N.W.2d 292 (Ct. App. 1981). A no-hire agreement between a supplier and its customers is not technically the equivalent of a non-compete agreement between businesses, but it is analogous. There is some obvious overlap between this test and the test for a valid employee non-compete covenant under Wis. Stat. § 103.465, which I have already addressed at some length above.

¶ 62. While it is conceivable that some no-hire agreements would fail this test, I am satisfied that the no-hire provision in the contract between Greenbriar and Dove is not an unreasonable restraint of trade under Wis. Stat. § 133.01. It is reasonably necessary for the protection of Greenbriar's investment in the recruitment and training of its employees; otherwise, Greenbriar becomes an involuntary training and recruitment agency for Dove. Because it is intended to protect Greenbriar's investment in this regard, the agreement is also reasonable in purpose. It is also reasonable in time, in that it extends only one year after termination of the agreement. It is reasonable in scope, because it binds only Dove and does not entirely prohibit the hiring of Greenbriar's employees, but, rather, imposes only the requirements of consent and payment of a reasonable fee. And, finally, it is not especially injurious to the public, as there is no evidence that it has an anticompetitive effect on the market for therapists in the Eau Claire/Chippewa Falls area. Reasonableness as to space, which concerns territorial restrictions, is not at issue here, for the reasons noted in ¶ 20. See Reimann, 102 Wis. 2d at 312 n.6.

¶ 63. In short, neither Wis. Stat. § 103.465 nor Wis. Stat. § 133.01 provides refuge for Dove in this case. Wisconsin Statute § 103.465 does not apply, and the no-hire provision is not contrary to the public policy expressed in that statute. Furthermore, the no-hire provision is not unenforceable as an unreasonable restraint of trade under Wis. Stat. § 133.01. Accordingly, the no-hire provision is enforceable. "Contract law rests on obligations imposed by bargain," and its integrity depends in no small part on the willingness of courts "to protect the expectancy interests of parties to private bargained-for agreements" and "hold commercial parties to their promises." Daanen & Janssen, Inc. v. Cedarapids, Inc., 216 Wis. 2d 395, 404, 573 N.W.2d 852 (1998). I would reverse the court of appeals, and reinstate the judgment of the circuit court.

¶ 64. I am authorized to state that Justice ANN WALSH BRADLEY joins this dissent.

        Heyde Companies, Inc v. Dove Healthcare, LLC, 2001 WI App 278, 249 Wis. 2d 32, 637 N.W.2d 437.

       All references to the Wisconsin Statutes are to the 1999-2000 version unless otherwise indicated.
      103.465 Restrictive covenants in employment contracts. A covenant by an assistant, servant or agent not to compete with his or her employer or principal during the term of the employment or agency, or after the termination of that employment or agency, 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 covenant, described in this subsection, 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.

        See also Wisconsin Indus. Sch. for Girls v. Clark County, 103 Wis. 651, 659, 79 N.W 422 (1899) (statute must be construed to give effect to the evident legislative intent though the result seems contrary to the strict letter of the statute); Fleischmann Const. Co. v. United States, 270 U.S. 349, 360 (1926) (strict letter of an act must yield to its evident spirit and purpose in order to give effect to the intent of the legislature); Paikoff v. Harris, 185 Misc.2d 372, 376 (N.Y. App. Term 1999) (in construing statute, court should consider the mischief sought to be remedied and construe statute so as to suppress the evil and advance the remedy").

       Wis. Stat. § 103.465 (1999-2000).

       Section 103.465 "does not change the prior law of what constitute unreasonable restraints because the section only requires the restrictions as to time and place to be reasonably necessary for the protection of the employer. If such a contract is void for other reasons, such as public policy, or sec. 133.01(1), Stats., or creates an undue hardship upon the employee a court of equity will not enforce it." Lakeside Oil Co. v. Slutsky, 8 Wis. 2d 157, 162, 98 N.W.2d 415 (1959). See also Streiffv. Am. Family Mut. Ins. Co., 118 Wis. 2d 602, 613 n.5, 348 N.W.2d 505 (1984); Holsen v. Marshall & Ilsley Bank, 52 Wis. 2d 281, 190 N.W.2d 189 (1971).
      For discussions of contracts in restraint of trade and against public policy, see, e.g., Restatement of Contracts §§ 514-15 (1932); Restatement (Second) of Contracts §§ 178-79, 186-88 (1979).

        Heyde Cos., Inc. v. Dove Healthcare, LLC, 2001 WI App 278, ¶ 13, 249 Wis. 2d 32, 637 N.W.2d 437.

       Dissent at ¶ 51.

       Dissent at ¶ 57.

       The majority has rewritten Wis. Stat. § 103.465 so that it now reads:

        A covenant by an assistairtTsei vanl uj. agent not to compete with his ui lier employ ei or principal during tlie term uf tlie employment or agency, oraftei tlie termination of that employe ment or "agency, 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 covenant, described in Lhis subsection; 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.


source: Caselaw Access Project

author: PER CURIAM.

license: Public Domain

text:
    In the Matter of Disciplinary Proceedings Against Gregory J. Straub, Attorney at Law: Board of Attorneys Professional Responsibility, n/k/a Office of Lawyer Regulation, Complainant, v. Gregory J. Straub, Respondent.
    Supreme Court

      No. 93-1718-D.

      Decided December 27, 2002.

    2002 WI 130
    (Also reported in 655 N.W.2d 111.)
   PER CURIAM.

¶ 1. We review the recommendation of the referee that Gregory J. Straub's license to practice law in Wisconsin be reinstated. The Office of Lawyer Regulation (OLR) and the Board of Bar Examiners join in that recommendation.

¶ 2. We adopt the referee's findings of fact and conclusions of law and agree with his recommendation that Gregory J. Straub's license to practice law be reinstated, subject to compliance with current Continuing Legal Education (CLE) requirements. Mr. Straub shall also be required to pay the costs of the reinstatement proceeding. In addition, for a period of two years after he opens a trust account, Mr. Straub shall be required to submit said trust account for inspection and monitoring by the OLR on a quarterly basis.

¶ 3. Gregory J. Straub was admitted to practice law in Wisconsin in 1990 and engaged in private practice in Milwaukee. By order dated September 16, 1993, Mr. Straub's license to practice law was revoked based on professional misconduct including forging a client's signature on a settlement check and release, converting a client's settlement funds to his own use, misrepresenting to his client and others the amount of the settlement received, settling clients' claims without their knowledge or authorization, depositing personal funds in an account with client funds, failing to keep required records of trust account transactions, and fabricating lien satisfactions in order to obtain a personal loan.

¶ 4. On March 20, 2001, Mr. Straub filed a petition for reinstatement of his license under SCR 22.28. Attorney Charles J. Herró was assigned as referee. The referee held a public hearing on the reinstatement petition in August 2002. Various witnesses testified at the hearing. The referee issued his report and recommendation on September 25, 2002.

¶ 5. The referee concluded that Mr. Straub had satisfactorily addressed all of the requirements for reinstatement set forth in SCR 22.29(4).

¶ 6. The referee recommended that Mr. Straub's license be reinstated subject to monitoring of his trust account on a quarterly basis by the OLR. The referee also recommended that Mr. Straub be required to pay the costs of the reinstatement proceeding.

¶ 7. After a review of the record we conclude that Gregory J. Straub has established by clear, satisfactory, and convincing evidence that he has satisfied all the criteria for reinstatement. Accordingly, we adopt the referee's findings of fact and conclusions of law and we agree with the referee's recommendation that Mr. Straub's license to practice law in Wisconsin be reinstated.

¶ 8. IT IS ORDERED that the petition for reinstatement of the license of Gregory J. Straub to practice law in Wisconsin is granted, effective the date of this order, subject to compliance with current CLE requirements.

¶ 9. IT IS FURTHER ORDERED that for a period of two years after Mr. Straub opens a trust account he be required to submit said trust account for inspection and monitoring by the OLR on a quarterly basis.

¶ 10. IT IS FURTHER ORDERED that within six months of the date of this order Gregory J. Straub pay to the OLR the costs of this proceeding. If the costs are not paid within the time specified, and absent a showing to this court of his inability to pay the costs within that time, the license of Gregory J. Straub to practice law in Wisconsin shall be suspended until further order of the court.

       SCR 22.28 provides: License reinstatement.
      (1) An attorney suspended from the practice of law for nonpayment of state bar membership dues or failure to comply with the trust account certification requirement or continuing legal education requirements may seek reinstatement under the following rules, as applicable:
      (a) An attorney whose suspension for nonpayment of state bar membership dues has been for a period of less than 3 consecutive years may seek reinstatement under SCR 10.03(6m)(a).

        (b) An attorney whose suspension for failure to comply with the continuing legal education requirements has been for a period of less them 3 consecutive years may seek reinstatement under SCR 31.11(1).
      (c) An attorney whose suspension for nonpayment of state bar membership dues has been for a period of 3 or more consecutive years may seek reinstatement under SCR 10.03(6m)(b).
      (d) An attorney whose suspension for failure to comply with the continuing legal education requirements has been for a period of 3 or more consecutive years may seek reinstatement under SCR 31.11(lm).
      (e) An attorney who has been suspended for failure to comply with the trust account certification requirement under SCR 20:1.15(g) may seek reinstatement under SCR 10.03(6m)(c).
      (2) The license of an attorney suspended for misconduct for less than six months shall be reinstated by the supreme court upon the filing of an affidavit with the director showing full compliance with all the terms and conditions of the order of suspension and the director's notification to the supreme court of the attorney's full compliance.
      (3) The license of an attorney that is revoked or suspended for misconduct for six months or more shall be reinstated pursuant to the procedure set forth in SCR 22.29 to 22.33 and only by order of the supreme court.

       SCR 22.29(4) provides:
      (4) The petition for reinstatement shall show all of the following:

        (a) The petitioner desires to have the petitioner's license reinstated.
      (b) The petitioner has not practiced law during the period of suspension or revocation.
      (c) The petitioner has complied fully with the terms of the order of suspension or revocation and will continue to comply with them until the petitioner's license is reinstated.
      (d) The petitioner has maintained competence and learning in the law by attendance at identified educational activities.
      (e) The petitioner's conduct since the suspension or revocation has been exemplary and above reproach.
      (f) The petitioner has a proper understanding of and attitude toward the standards that are imposed upon members of the bar and will act in conformity with the standards.
      (g) The petitioner can safely be recommended to the legal profession, the courts and the public as a person fit to be consulted by others and to represent them and otherwise act in matters of trust and confidence and in general to aid in the administration of justice as a member of the bar and as an officer of the courts.
      (h) The petitioner has fully complied with the requirements set forth in SCR 22.26.
      (j) The petitioner's proposed use of the license if reinstated.
      (k) A full description of all of the petitioner's business activities during the period of suspension or revocation.
      (m) The petitioner has made restitution to or settled all claims of persons injured or harmed by petitioner's misconduct or, if not, the petitioner's explanation of the failure or inability to do so.


text:
    In the Matter of Disciplinary Proceedings Against Anne B. Shindell, Attorney at Law. Office of Lawyer Regulation, f/k/a Board of Attorneys Professional Responsibility, Complainant-Respondent, v. Anne B. Shindell, Respondent-Appellant.
    Supreme Court

      No. 00-2913-D.

      Submitted on briefs November 14, 2002.

      Decided December 27, 2002.

    2002 WI 133
    (Also reported in 654 N.W.2d 844.)

      For the respondent-appellant there were briefs by Terry E. Johnson, Frederick J. Smith, and Peterson, Johnson & Murray, S.C., Milwaukee.
    For the complainant-respondent, there was a brief by Robert G. Krohn and Roethe, Krohn, Pope, McCarthy & Haas, LLP, Edgerton.
   PER CURIAM.

¶ 1 Attorney Anne B. Shindell appealed from the referee's report concluding that Attorney Shindell engaged in misconduct with respect to her representation of five clients. She also appealed from the referee's recommendation that her license to practice law be suspended for one year.

¶ 2. We determine that the referee's findings of fact are supported by clear, satisfactory, and convincing evidence. We further determine that the seriousness of the misconduct warrants the suspension of Attorney Shindell's license to practice law for one year.

¶ 3. Attorney Shindell was admitted to practice law in Wisconsin in 1979 and practiced in Milwaukee, specializing in employment law. In 1995 she consented to the imposition of a private reprimand for violating a statute, supreme court rule, supreme court order, or supreme court decision regulating the conduct of lawyers, as well as violating supreme court rules regarding fees, and violating the rule that requires a partner in a law firm to make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurances that all lawyers in the firm conform to the Rules of Professional Conduct. On October 21, 2002, in another proceeding, this court granted the motion of the Office of Lawyer Regulation (OLR) to summarily suspend Attorney Shindell's license based on criminal convictions for attempted theft by fraud and resisting or obstructing an officer.

¶ 4. The OLR filed its complaint on October 23, 2000. Attorney Shindell filed an answer in November 2000. Attorney Stanley F. Hack was appointed as referee. Hearings were conducted before the referee between August 20, 2001, and October 9, 2001. The referee issued his report and recommendation on January 22, 2002. The referee made findings of fact based on testimony and documentary evidence presented at the hearings concerning Attorney Shindell's representation of the five clients. The referee found that in the course of representing these clients Attorney Shindell engaged in a pattern of neglect that included a failure to return unearned fees in several matters.

¶ 5. The first claim of misconduct alleged in the OLR's complaint involved a client who retained Attorney Shindell in early 1994 to prosecute an employment termination and benefits dispute, including an Equal Employment Opportunity Commission (EEOC) claim, against her former employer. Between January 1994 and early 1996 Attorney Shindell filed an initial EEOC claim and engaged in negotiations with the former employer's counsel regarding the client's retirement benefits and health insurance coverage.

¶ 6. In April and May 1995 the client wrote to Attorney Shindell inquiring about the status of the case. Attorney Shindell failed to respond. In June of 1995 Attorney Shindell informed the client that she had obtained a settlement with the former employer regarding medical and retirement benefits. In August 1995 the client wrote to Attorney Shindell inquiring as to the status of the settlement papers and expressing her concern over the health insurance continuation issue. Attorney Shindell's office sent a proposed agreement to the client on September 7, 1995. The agreement did not include a reference to the special payment allowance which the client claimed to have understood to be part of the agreement based on her earlier conversations with Attorney Shindell.

¶ 7. After trying unsuccessfully to contact Attorney Shindell by telephone the client wrote to Attorney Shindell on October 5, 1995, urging her to complete the litigation and again emphasizing her concern about health insurance coverage. After hearing nothing further from Attorney Shindell the client again wrote to Attorney Shindell on October 22, 1995, and enclosed an executed copy of the separation agreement and general release to which the client had added initialed handwritten language providing for inclusion of the special payment allowance. On October 26, 1995, Attorney Shindell signed her approval on the agreement and also initialed the handwritten language pertaining to the special payment allowance. By letters dated November 9, 1995, and January 3, 1996, the client again urged Attorney Shindell to finalize the matter.

¶ 8. On January 24, 1996, Attorney Shindell wrote to adverse counsel requesting a cost analysis in the event the former employer were to provide the group retiree health benefit to the client. Adverse counsel replied that he had earlier stated the former employer's position, which was that the proposed settlement agreement specifically omitted any special payment allowance. Attorney Shindell did not forward this letter to the client until March 18, 1996. On April 3, 1996, Attorney Shindell informed the client that comprehensive health insurance could be available to her if she would accept the settlement offer without the added language pertaining to the special payment allowance.

¶ 9. Attorney Shindell took no further action regarding the pending claim. On April 18, 1996, EEOC issued a dismissal and notice of rights within 90 days of the dismissal letter stating it was unlikely further investigation would result in a finding of discrimination but that no decision had been made on the merits of the charge. In the course of an April 26, 1996, telephone conversation with Attorney Shindell the client agreed to withdraw the special payment allowance claim with the understanding that the settlement agreement would then be accepted by her former employer to include health insurance coverage. Without notice to the client Attorney Shindell closed the file.

¶ 10. In September 1997 the client wrote to Attorney Shindell reminding her that the health insurance coverage needed to commence no later than April 1, 1998, and inquiring as to the status of the EEOC claim. Attorney Shindell failed to respond. The client again wrote to Attorney Shindell in February and October 1998. The client's telephone log, which was admitted into evidence at the disciplinary hearings, revealed approximately 20 calls to Attorney Shindell between February 26, 1998, and August 28, 1998. Most of those calls were not returned by Attorney Shindell.

¶ 11. In April or May of 1998 Attorney Shindell attempted to contact the former employer regarding the client's health insurance coverage. Adverse counsel responded by letter of May 7, 1998, saying that a settlement agreement had never been reached between the parties. Attorney Shindell never forwarded a copy of this letter to the client or advised the client of its content.

¶ 12. The client's brother attempted to contact Attorney Shindell by telephone to discuss the matter. After receiving no response the client's brother wrote to Attorney Shindell. Attorney Shindell subsequently spoke to the client's brother and said the litigation would be reopened and that the former employer's counsel would again be contacted for purposes of enforcing the prior agreement. Attorney Shindell promised some action in the matter and a written report of her progress no later than February 16,1999. She never provided any such report to the client or the client's brother.

¶ 13. The second claim of misconduct alleged in the OLR's complaint involved a client whose employment was terminated in October 1997. The client was interested in negotiating a better deal for himself than his former employer had initially offered, and he paid Attorney Shindell a $500 retainer. Attorney Shindell obtained the client's personnel file from the former employer and corresponded with the former employer regarding benefits that might be available to the client. Attorney Shindell also reviewed the former employer's offer and on February 6,1998, submitted a counteroffer.

¶ 14. During a February 12, 1998, telephone conversation with the former employer's human resources corporate counsel Attorney Shindell attempted to get the former employer to find another position for the client. The former employer refused to modify its original severance package offer. Attorney Shindell failed to inform the client of this negotiating session. On March 5, 1998, Attorney Shindell and the former employer's counsel continued their discussions regarding the client's severance package. The former employer's counsel agreed to provide Attorney Shindell with a deadline of March 13, 1998, to accept or reject their offer.

¶ 15. On March 13, 1998, the client and Attorney Shindell discussed the matter and Attorney Shindell informed the client for the first time that his former employer would not extend benefits beyond the original severance package offer. During the week of March 23, 1998, the client made numerous calls to Attorney Shindell. Attorney Shindell failed to return any of the calls. After hearing nothing from Attorney Shindell the client negotiated directly with his former employer and was able to obtain certain concessions from them in addition to the benefits set forth in the original severance package offer. Attorney Shindell was not involved in these negotiations or the ultimate settlement. During his final negotiations with his former employer the client was advised by the former employer's counsel that counsel had informed Attorney Shindell of their position on the severance agreement on February 12, 1998.

¶ 16. On May 10, 1999, the Board of Attorneys Professional Responsibility (BAPR) (the predecessor to the OLR) staff sent Attorney Shindell a letter via regular mail requesting a response to the client's griev-anee within 20 days. On June 11, 1999, having received no response the BAPR staff sent Attorney Shindell another letter via certified mail demanding a response to the client's grievance within ten days. On June 21, 1999, Attorney Shindell telephoned the BAPR staff and said she would file a response by the end of the week. The response was not filed by that date.

¶ 17. The third claim of misconduct alleged in the OLR's complaint involved a client whose employment was terminated in November 1998 and sought Attorney Shindell's services to improve his severance package. This client signed a retainer agreement letter on December 11, 1998, and paid Attorney Shindell a $1000 retainer. The retainer agreement provided that the $1000 was to be applied to the fees and costs incurred in the matter. The agreement did not contain any provision indicating the $1000 was not refundable. In early January 1999 the client contacted Attorney Shindell's office inquiring as to the status of his case. Attorney Shindell failed to return the client's calls and he decided to terminate her services. He requested a refund of his $1000 retainer.

¶ 18. On January 7, 1999, an employee in Attorney Shindell's office sent Attorney Shindell an e-mail advising her that the client did not want to proceed any further and that he wanted the $1000 retainer returned, less any earned fees. On January 25, 1999, Attorney Shindell sent the client a billing statement reflecting legal services totaling $16.50 and disbursements totaling $19.25. On February 23, 1999, the client sent Attorney Shindell a certified letter saying he had left eight telephone messages that were not returned and that he wanted the $1000 retainer, less disbursements, returned. Attorney Shindell failed to respond.

¶ 19. On June 15, 1999, the client filed a small claims action against Attorney Shindell in Milwaukee County. The client obtained a default judgment against Attorney Shindell in the amount of $1182. Attorney Shindell satisfied the judgment on or about October 1, 1999.

¶ 20. By letters dated March 31, 1999, and April 30, 1999, the BAPR staff notified Attorney Shindell of the client's grievance and requested a written response. By telephone conversation on May 6, 1999, the BAPR staff extended the time for Attorney Shindell to respond to the grievance to May 24, 1999. No response was filed by that date. By letter dated June 2, 1999, the BAPR staff again requested that Attorney Shindell provide a written response to the grievance. On June 21, 1999, Attorney Shindell called the BAPR staff and indicated a response would be received by the end of that week. No response was filed.

¶ 21. The fourth claim of misconduct alleged in the OLR's complaint involved a client who retained Attorney Shindell in April 1998 to either negotiate a settlement or proceed to litigation with her deceased husband's employer and its insurance company regarding salary and death benefit issues. The client paid Attorney Shindell a retainer of $1000.

¶ 22. The client initially met with an associate at Attorney Shindell's firm. The associate left the firm shortly thereafter. Prior to her departure the associate prepared a memorandum to the file setting forth a number of facts and conclusions regarding the client's claims. The memorandum generally concluded that the client's claim was not viable since it depended upon proving that the client's husband's employer acted in a discriminatory manner toward the client's husband under the Americans with Disabilities Act. The associate concluded this proof was difficult and that the matter did .not warrant litigation. The associate urged that the Shindell law firm contact the employer's counsel to see whether they would stand by an earlier proposal that had been made to the client to include payment of wages and benefits due at the original contract rate rather than at a reduced rate, provided the client would agree not to pursue additional life insurance benefits. The associate also recommended the Shindell law firm contact a medical malpractice attorney to see if there was a viable claim arising from the circumstances surrounding the care the client's husband received prior to his death. The associate informed the client that Attorney Shindell would be handling the rest of the case.

¶ 23. Attorney Shindell first met with the client on January 9, 1998. She did not discuss the contents of the associate's memorandum with the client at that time. Following this meeting the client wrote numerous letters and made multiple telephone calls to Attorney Shindell to inquire about the status of the case. The client also provided additional information relating to her claim by correspondence dated October 12, 1998, and February 5, 1999. Attorney Shindell failed to respond to the client's inquiries.

¶ 24. On February 17, 1999, the client wrote to Attorney Shindell saying she was terminating the attorney-client relationship. By certified letter dated February 25, 1999, the client requested that her file be sent to her. Attorney Shindell failed to respond. In a May 24, 1999, telephone call with Attorney Shindell the client again requested her file, and by letter dated June 5, 1999, the client asked for a refund of all monies that had been paid to Attorney Shindell. On July 1,1999, the client sent a certified letter to Attorney Shindell again asking for her file and a refund of the fees paid. Attorney Shindell failed to respond. The client paid approximately $2800 in fees and costs to Attorney Shindell.

¶ 25. By letter dated August 6, 1999, the BAPR staff notified Attorney Shindell of the client's grievance and requested her to file a written response within 20 days. Attorney Shindell requested and received an extension until September 10, 1999. On September 17, 1999, the BAPR staff sent a certified letter to Attorney Shindell noting the prior extension to respond to the client's grievance and informing Attorney Shindell that a written response was to be postmarked no later than September 27, 1999. By voicemail message of September 28, 1999, Attorney Shindell requested an additional extension until October 14, 1999, to respond to the grievance. The extension was granted by the BAPR staff. Attorney Shindell failed to submit a written response to the client's grievance.

¶ 26. The fifth claim of misconduct alleged in the OLR's complaint involved a man whose employment was terminated in October of 1998. In late 1998 he retained Attorney Shindell to advise him regarding a possible monetary claim against his former employer. Attorney Shindell agreed to research the merits of the claim and to send a demand letter to the client's former employer within a month. The client provided Attorney Shindell with various documents relevant to his claim and paid her a $1000 retainer fee.

¶ 27. In March and early April of 1999 the client attempted to contact Attorney Shindell several times to inquire about the status of his case. Attorney Shindell either failed to respond or provided evasive answers. She also failed to forward a demand letter to the client's former employer.

¶ 28. On or about April 20, 1999, the client received Attorney Shindell's billing statement. He wrote to her disputing various billing entries and terminating her legal representation. He requested a return of the unearned portion of his retainer fee. The client wrote additional letters on May 4 and May 14, 1999, again demanding return of the unearned portion of his retainer. Attorney Shindell failed to respond.

¶ 29. On May 15, 1999, the client filed a small claims action against Attorney Shindell in Milwaukee County seeking return of the unearned portion of the retainer fee. Attorney Shindell was personally served with the small claims summons and complaint on May 17, 1999. That same day she wrote to the client promising to send a final bill with any refund that might be due.

¶ 30. On June 4, 1999, a default judgment was entered in the client's favor in the amount of $987.92. On May 24, 2000, Attorney Shindell executed and saw to the filing of a satisfaction of judgment indicating that the judgment had been fully paid and satisfied. The client never consented to or authorized the signing or the filing of a satisfaction of judgment.

¶ 31. By letter dated June 22, 1999, the BAPR staff advised Attorney Shindell of the client's grievance and requested a written response within 20 days. Attorney Shindell failed to respond. By letter of July 22, 1999, the BAPR staff again requested a written response to the client's grievance no later than August 2, 1999. Attorney Shindell again failed to respond.

¶ 32. The referee found that by failing to respond to telephone calls and inquiries and failing to perform appropriate legal services on behalf of the first, second, and third clients, Attorney Shindell violated SCR 20:1.3. The referee also found that by failing to respond to letters and telephone calls from the first, second, and fourth clients inquiring as to the status of their claims and by not providing those clients with timely information, Attorney Shindell violated SCR 20:1.4(a). The referee also found that by failing to inform the first client about the status of negotiations and failing to inform her of the consequences of not pursuing either the health insurance issue or the EEOC claims, and by failing to inform the second client about his former employer's position as to the severance agreement in a timely manner, Attorney Shindell violated SCR 20:1.4(b).

¶ 33. The referee also concluded that by failing to provide further legal services on behalf of the first, third, fourth, and fifth clients, Attorney Shindell violated SCR 20:1.16(d). The referee also found that by filing a judgment satisfaction on her own behalf without authority from the fifth client and by falsely asserting within the document that the small claims judgment had been satisfied to the fifth client's satisfaction, Attorney Shindell violated SCR 20:3.3(a)(1). The referee also concluded that Attorney Shindell's actions with respect to the satisfaction of judgment violated SCR 20:8.4(c).

¶ 34. The referee also concluded that by failing to provide written responses to grievances filed by the second, third, fourth, and fifth clients, and by failing to cooperate with the BAPR's investigation, Attorney Shindell violated former SCR 21.03(4) and 22.07(2).

¶ 35. The referee recommended that Attorney Shindell's license to practice law in Wisconsin be suspended for one year. He also recommended that, as a condition to seeking reinstatement, Attorney Shindell should be required to refund $2800 to the fourth client and should be required to pay the small claims judgment entered in favor of the fifth client in the amount of the judgment, together with statutory interest to the date paid. The referee also recommended that Attorney Shindell be ordered to pay the OLR the cost of the proceedings within 60 days.

¶ 36. Attorney Shindell argues that many of the referee's findings of fact are clearly erroneous. She asserts that the referee erred in giving too much weight to the testimony of the five former clients while discounting testimony presented by disinterested witnesses. She also argues that the referee erroneously punished her for not paying the small claims judgment entered in favor of the fifth client, and she asserts there is no ethical or professional obligation to pay a judgment. She also asserts that the referee discounted various mitigating factors such as the fact that she went through an acrimonious divorce, suffered from serious health problems, and had administrative problems at her office, including embezzlement by a former office manager and difficulties retaining employees. She asserts that to the extent this court finds that any neglect of client matters has been proven, a 60-day suspension would be an appropriate level of discipline.

¶ 37. The OLR responds that the referee's decision appropriately addresses the underlying witness credibility issues. The OLR contends the referee's findings of fact are not clearly erroneous and that his conclusions of law are supported by clear, satisfactory, and convincing evidence.

¶ 38. A referee's findings of fact on a disciplinary matter will not be set aside unless clearly erroneous. In re Disciplinary Proceedings Against Sosnay, 209 Wis. 2d 241, 243, 562 N.W.2d 137 (1997). Conclusions of law are reviewed de novo. In re Disciplinary Proceedings Against Carroll, 2001 WI 130, 248 Wis. 2d 662, 675, 636 N.W.2d 718. Since the referee's findings of fact have not been shown to be clearly erroneous, we adopt them. We also adopt the conclusions of law as set forth in the referee's report and recommendation.

¶ 39. The referee noted, and we agree, that the record demonstrates the existence of a number of mitigating factors, including the fact that Attorney Shindell suffered from serious personal and health problems and also had administrative problems in her office which seemed to peak in early 1999. As the referee also noted, however, it would have been appropriate for Attorney Shindell to have obtained assistance from other attorneys in her office or brought in outside counsel during this time, and the absence of this assistance was not the fault of her clients, who were unaware of Attorney Shindell's problems.

¶ 40. Attorney Shindell's misconduct with respect to her handling of the five client matters and her failure to cooperate with the BAPR's investigation are serious failings warranting a suspension of her license. A one-year suspension of her license to practice law is appropriate discipline for her professional misconduct.

¶ 41. IT IS ORDERED that the license of Attorney Anne B. Shindell to practice law in Wisconsin remains suspended for a period of one additional year, effective the date of this order.

¶ 42. IT IS FURTHER ORDERED that Attorney Anne B. Shindell comply with the provisions of SCR 22.26 concerning the duties of a person whose license to practice law in Wisconsin has been suspended.

¶ 43. IT IS FURTHER ORDERED that Attorney Anne B. Shindell refund, within 60 days of the date of this order, $2800 to the fourth client. If this refund is not made within the specified time, the license of Attorney Anne B. Shindell to practice law in Wisconsin shall remain suspended until further order of the court.

¶ 44. IT IS FURTHER ORDERED that within 60 days of the date of this order, Attorney Anne B. Shindell pay the small claims judgment entered in favor of the fifth client with interest accrued to date. If this payment is not made within the specified time, the license of Attorney Anne B. Shindell to practice law in Wisconsin shall remain suspended until further order of the court.

¶ 45. IT IS FURTHER ORDERED that within 60 days of the date of this order, Attorney Anne B. Shindell pay to the Office of Lawyer Regulation the costs of this proceeding. If the costs are not paid within the time specified and absent a showing to this court of her inability to pay the costs within that time, the license of Attorney Anne B. Shindell to practice law in Wisconsin shall remain suspended until further order of the court.

¶ 46. IT IS FURTHER ORDERED that restitution to the fourth client and payment of the small claims judgment, with interest, to the fifth client, shall be paid prior to paying costs to the- Office of Lawyer Regulation.

       SCR 20:1.3 provides: "Diligence. A lawyer shall act with reasonable diligence and promptness in representing a client."

       SCR 20:1.4(a) provides: "Communication, (a) A lawyer shall keep a client reasonably informed about the status of a matter and promptly comply with reasonable requests for information."

       SCR 20:1.4(b) provides: "(b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation."

       SCR 20:1.16(d) provides:
      (d) Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client's interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payment of fee that has not been earned. The lawyer may retain papers relating to the client to the extent permitted by other law.

       SCR 20:3.3(a)(l) provides: "Candor toward the tribunal, (a) A lawyer shall not knowingly: (1) make a false statement of fact or law to a tribunal."

       SCR 20:8.4(c) provides: "It is professional misconduct for a lawyer to: (c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation."

       Former SCR 21.03(4) provides: "(4) Every attorney shall cooperate with the board and the administrator in the investigation, prosecution and disposition of grievances and complaints filed with or by the board or administrator."
      Former SCR 22.07(2) provides:
      During the course of an investigation, the administrator or a committee may notify the respondent of the subject being investigated. The respondent shall fully and fairly disclose all facts and circumstances pertaining to the alleged misconduct or medical incapacity within 20 days of being served by ordinary mail a request for response to a grievance. The administrator in his or her discretion may allow additional time to respond. Failure to provide information or misrepresentation in a disclosure is misconduct. The administrator or committee may make a further investigation before making a recommendation to the board.