Runzheimer International, Ltd. v. David Friedlen

2015 WI 45
SUPREME COURT OF WISCONSIN
CASE NO.: 2013AP1392
COMPLETE TITLE: Runzheimer International, Ltd.,
Plaintiff-Appellant,
v.
David Friedlen and Corporate Reimbursement
Services, Inc.,
Defendants-Respondents.
ON CERTIFICATION FROM THE COURT OF APPEALS
OPINION FILED: April 30, 2015
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: October 1, 2014
SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Milwaukee
JUDGE: William W. Brash
JUSTICES:
CONCURRED: ABRAHAMSON, C.J., concurs. (Opinion Filed.)
DISSENTED:
NOT PARTICIPATING:
ATTORNEYS:
For the plaintiff-appellant, there were briefs by Michael
B. Apfeld, Michael D. Huitnik, Erin M. Cook, and Godfrey & Kahn,
S.C., Milwaukee. Oral argument by Michael B. Apfeld.
For the defendants-respondents (in the court of appeals),
there was a brief filed Daniel D. Barker, Tony H. McGrath, and
Jeffrey M. Rosin, and Constangy, Brooks and Smith LLP, Madison.
Oral argument by Jeffrey M. Rosin.
An amicus curiae brief was filed by James A. Buchen and
Andrew C. Cook on behalf of Wisconsin Manufacturers and Commerce
and the Wisconsin Civil Justice Council, Inc.
2015 WI 45
NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2013AP1392
(L.C. No. 2012CV859)
STATE OF WISCONSIN : IN SUPREME COURT
Runzheimer International, Ltd.,
Plaintiff-Appellant,
v.
FILED
David Friedlen and Corporate Reimbursement APR 30, 2015
Services, Inc.,
Diane M. Fremgen
Clerk of Supreme Court
Defendants-Respondents.
APPEAL from a final judgment of the Circuit Court for
Milwaukee County, William W. Brash, III, Judge. Reversed and
cause remanded.
¶1 DAVID T. PROSSER, J. This case is before the court
on certification by the court of appeals pursuant to Wis. Stat.
§ (Rule) 809.61 (2011-12).1 It requires us to examine the
enforceability of a restrictive covenant signed by an existing
at-will employee.
1
All subsequent references to the Wisconsin Statutes are to
the 2011-12 version unless otherwise indicated.
No. 2013AP1392
¶2 David Friedlen (Friedlen) had worked for Runzheimer
International, Ltd. (Runzheimer) for more than fifteen years
when Runzheimer required all of its employees, including
Friedlen, to sign restrictive covenants. Runzheimer gave
Friedlen two weeks to review the covenant, after which Friedlen
was required to sign it or be fired. Friedlen chose to sign the
covenant and continued to work for Runzheimer for more than two
years before being terminated in 2011. Friedlen then sought
employment at Corporate Reimbursement Services (CRS), one of
Runzheimer's competitors.
¶3 Runzheimer sued both Friedlen and CRS, alleging that
Friedlen's employment at CRS constituted a breach of the
restrictive covenant. Friedlen and CRS moved for summary
judgment on Runzheimer's claims on grounds that the covenant was
unenforceable because it lacked consideration. The Milwaukee
County Circuit Court2 initially denied the motion. The parties
then conducted additional discovery, Runzheimer filed an amended
complaint, and Friedlen and CRS again moved for summary
judgment. This time the court granted summary judgment against
three of Runzheimer's four claims. The court ruled that
Runzheimer's promise not to fire Friedlen immediately if he
signed the restrictive covenant was an illusory promise and did
not constitute consideration to support the agreement because
Runzheimer retained "the unfettered right to discharge Friedlen
2
The Honorable William W. Brash, III, presiding.
2
No. 2013AP1392
at any time, including seconds after Friedlen signed the
Agreement."
¶4 Runzheimer appealed, and the Wisconsin Court of
Appeals certified the case to this court. In its certification,
the court explained that Wisconsin law fails to adequately
address whether an employer's forbearance of its right to
terminate an existing at-will employee in exchange for the
employee agreeing to a restrictive covenant constitutes lawful
consideration.3
¶5 We hold that an employer's forbearance in exercising
its right to terminate an at-will employee constitutes lawful
consideration for signing a restrictive covenant. Although,
theoretically, an employer could terminate an employee's
employment shortly after having the employee sign a restrictive
covenant, the employee would then be protected by other contract
formation principles such as fraudulent inducement or good faith
and fair dealing, so that the restrictive covenant could not be
enforced.
¶6 In this case, the circuit court made no determination
as to the reasonableness of the covenant's terms. Because the
record and arguments before us are undeveloped on the issue of
reasonableness, we decline to address it. Accordingly, we
reverse the decision of the circuit court and remand the cause
3
For purposes of clarity, we use the term "lawful
consideration" instead of "sufficient consideration" to
differentiate the existence of consideration from the adequacy
of consideration.
3
No. 2013AP1392
to that court for further proceedings consistent with this
opinion.
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
¶7 Friedlen was an at-will employee at Runzheimer, a
Wisconsin corporation that provides "a range of employee
mobility services relating to business vehicles, relocation,
travel management, corporate aircraft, and virtual office
programs." Runzheimer hired Friedlen in 1993 as a Business
Development Consultant. Friedlen worked primarily in this role
for Runzheimer, except from 2001 to 2006 when he worked in
different capacities. Friedlen participated in Runzheimer's
Incentive Plan each year, irrespective of his position, starting
with the year he was hired. Runzheimer's Incentive Plan
consisted of bonuses based on a percentage of sales in the
employee's territory. Runzheimer reviewed the Plan annually and
adjusted it for sales targets.
¶8 In 2009 Runzheimer required all employees to sign a
restrictive covenant. Runzheimer's Director of Business
Development, Michael W. Bassi, permitted Friedlen to review the
restrictive covenant for two weeks but told him that if he did
not sign the agreement by the end of that time, his employment
would be terminated. Friedlen's participation in Runzheimer's
Incentive Program also was contingent on his signing the
restrictive covenant.
¶9 The restrictive covenant included the following terms:
1. Confidentiality Obligations. . . . After the
end, for whatever reason, of Employee's [Friedlen's]
4
No. 2013AP1392
employment with the Company [Runzheimer], Employee
will not directly or indirectly use or disclose any
Trade Secret of the Company. For a period of 24 months
following the end, for whatever reason, of Employee's
employment with the Company, Employee will not
directly or indirectly use or disclose any
Confidential Information of the Company. Nothing in
this Agreement shall prevent Employee, after the end
of employment with the Company, from using general
skills and knowledge gained while employed by the
Company.
. . . .
4. Post–Employment Non–Solicitation of Restricted
Customers. For 24 months following the end, for
whatever reason, of Employee's employment with the
Company, Employee agrees not to directly or indirectly
sell or attempt to sell to any Restricted Customers
any goods, products or services of the type or
substantially similar to the type Employee sold,
marketed, produced or supported on behalf of the
Company during the 12 months prior to the end of the
Employee's employment with the Company.
5. Post–Employment Restricted Services
Obligation. For 24 months following the end, for
whatever reason, of Employee's employment with the
Company, Employee agrees not to directly or indirectly
provide to any Competitor Restricted Services or
advice or counsel concerning the provision of
Restricted Services in the geographic area in which,
during the 12 months prior to the end of the
Employee's employment with the Company, Employee
provided services or assisted any Company employee or
agent in the provision of services to or on behalf of
the Company.
¶10 Friedlen signed the restrictive covenant on June 15,
2009. He received more than $20,000 in 2009 from Runzheimer's
Incentive Plan in addition to his regular compensation.
Runzheimer employed Friedlen for 29 months after he signed the
5
No. 2013AP1392
restrictive covenant. On November 16, 2011, however, Runzheimer
terminated Friedlen's employment.4
¶11 Following his termination, Friedlen reached out to
CRS. CRS is a competitor of Runzheimer, as both corporations
administer services for employers to utilize Internal Revenue
Service guidelines to determine how employers can reimburse
employees without tax consequences for the business use of the
employees' personal vehicles. Friedlen retained independent
counsel to review the restrictive covenant and determine its
enforceability. Friedlen's independent counsel opined that the
restrictive covenant was not enforceable. CRS then offered
Friedlen a position, which he accepted on December 14, 2011. He
began work for CRS on January 2, 2012.
¶12 On January 18, 2012, Runzheimer sent Friedlen a letter
demanding his compliance with the restrictive covenant.
Friedlen ignored Runzheimer's demand because he believed the
restrictive covenant was unenforceable. Consequently,
Runzheimer filed a complaint against Friedlen and CRS on January
20, 2012, alleging: (1) Friedlen breached the restrictive
covenant, (2) Friedlen misappropriated Runzheimer's trade
secrets, and (3) CRS tortiously interfered with the restrictive
covenant.
4
The reason for this termination is not at issue; Friedlen
concedes that Runzheimer's termination of his employment was
legal.
6
No. 2013AP1392
¶13 On February 16, Friedlen and CRS filed a motion
seeking dismissal (or, alternatively, summary judgment) of
Runzheimer's claims. They argued that the restrictive covenant
was unenforceable because it lacked consideration. The
Milwaukee County Circuit Court, William W. Brash, III, Judge,
denied the motion, with some hesitation, because of material
questions of fact about consideration.
¶14 On November 5, 2012, after conducting additional
discovery, Runzheimer filed an amended complaint that included
an additional claim of common law misappropriation of
confidential information against both Friedlen and CRS and a
claim of tortious interference with prospective business
relationship, also against both defendants. On November 15,
Friedlen and CRS again moved for summary judgment on all claims.
¶15 On May 14, 2013, the circuit court granted the
defendants' motion on all claims except the misappropriation
claim. In explaining its ruling on Runzheimer's breach of
contract claim, the court stated, "Runzheimer made an illusory
promise of continued employment to Friedlen. Such a promise
cannot constitute consideration for the Agreement. The fact
that Friedlen continued his employment with Runzheimer for years
after the Agreement does not change the analysis."
¶16 The court determined that Wisconsin law does not
adequately address whether continued employment of an existing
at-will employee is lawful consideration supporting enforcement
of a restrictive covenant. Nevertheless, the court stated that
its ruling was consistent with the Wisconsin Court of Appeals'
7
No. 2013AP1392
analysis of employment-at-will situations, as well as this
court's opinions on consideration in restrictive covenants.
¶17 All parties stipulated to dismissal of the remaining
claims against CRS and Friedlen with prejudice, and an order for
dismissal was filed on June 4, 2013. Runzheimer then appealed
on June 19. The court of appeals thereafter certified the case
for our review, asking us whether "consideration in addition to
continued employment [is] required to support a covenant not to
compete entered into by an existing at-will employee." We
accepted the certification on June 12, 2014.
II. DISCUSSION
A. Standard of Review
¶18 This case requires us to review the circuit court's
decision granting summary judgment. "We review a decision on a
motion for summary judgment independently, employing the same
methodology as the circuit court." Estate of Genrich v. OHIC
Ins. Co., 2009 WI 67, ¶10, 318 Wis. 2d 553, 769 N.W.2d 481.
Restrictive covenants are contracts, the interpretation of which
is a matter of law that we review de novo. Star Direct, Inc. v.
Dal Pra, 2009 WI 76, ¶18, 319 Wis. 2d 274, 767 N.W.2d 898.
¶19 "Wisconsin courts treat contracts concerning
employment like any other contract," including agreements
between employers and at-will employees formed subsequent to
hiring that supplant or modify the original employment
relationship. Tinder v. Pinkerton Sec., 305 F.3d 728, 734 (7th
Cir. 2002) (citing Ferraro v. Koelsch, 124 Wis. 2d 154, 368
N.W.2d 666 (1985)). A covenant not to compete is such a
8
No. 2013AP1392
contract. NBZ, Inc. v. Pilarski, 185 Wis. 2d 827, 837, 520
N.W.2d 93 (Ct. App. 1994) (citing Behnke v. Hertz Corp., 70
Wis. 2d 818, 820, 235 N.W.2d 690 (1975)).
¶20 The elements of an enforceable contract are offer,
acceptance, and consideration. Rosecky v. Schissel, 2013 WI 66,
¶57, 349 Wis. 2d 84, 833 N.W.2d 634. "The existence of an offer
and acceptance are mutual expressions of assent, and
consideration is evidence of the intent to be bound to the
contract." NBZ, 185 Wis. 2d at 837 (citing 1 Arthur Linton
Corbin, Corbin on Contracts §§ 11, 112 (1963)).
¶21 We have defined consideration as "a detriment incurred
by the promisee or a benefit received by the promisor at the
request of the promisor . . . . Neither the benefit to the
promisor nor the detriment to the promisee need be actual." See
First Wis. Nat'l Bank v. Oby, 52 Wis. 2d 1, 5, 188 N.W.2d 454
(1971) (quoting 1 Samuel Williston & Walter H.E. Jaeger, A
Treatise on the Law of Contracts §§ 102, 102A (3d ed. 1957));
see also Hardscrabble Ski Area v. First Nat'l Bank, 42
Wis. 2d 334, 344, 166 N.W.2d 191 (1969). Additionally, "a
promise for a promise, or the exchange of promises, will
constitute consideration to support any contract of [a]
bilateral nature." Ferraro, 124 Wis. 2d at 164 (citations
omitted).
B. Legal Background
¶22 We have previously addressed whether an employer's
requirement that an at-will employee sign a restrictive covenant
as part of the hiring contract constitutes lawful consideration.
9
No. 2013AP1392
See Wis. Ice & Coal Co. v. Lueth, 213 Wis. 42, 43, 250 N.W. 819
(1933).5 In Lueth, we explained that such an agreement does not
fail for lack of lawful consideration even though the employer
is free to terminate the employment relationship at any time.
Id. at 44.
¶23 Runzheimer would have us rule that a similar agreement
between an employer and an existing at-will employee does not
lack lawful consideration either. Runzheimer argues that
existing at-will employees who are required to sign a
restrictive covenant should not be treated differently from new
at-will employees because in both cases the employer is
promising employment in exchange for the employee's signing of
the covenant. In addition, both the employer and employee are
as free to terminate the employment relationship at the start of
employment as they are several years later. Accordingly,
Runzheimer argues, a promise of continued employment that an
employer makes to an existing at-will employee in exchange for
the employee's signing of a restrictive covenant constitutes
lawful consideration.
¶24 Friedlen differentiates the circumstances surrounding
the creation of an at-will employment relationship from the
circumstances surrounding an existing at-will employment
relationship. He argues that at the beginning of the
relationship, both parties experience numerous detriments and
5
See also Eureka Laundry Co. v. Long, 146 Wis. 205, 131
N.W. 412 (1911), for extended discussion of the issue.
10
No. 2013AP1392
benefits. For example, at the beginning of the relationship,
employers expend resources on workers' compensation,
unemployment insurance, and compliance with state and federal
employment laws. Employers also provide a new employee with
"access to the employer's facility, business information,
experience, training and compensation." Friedlen argues that
this exchange of benefits to the employee and detriments to the
employer at the beginning of the relationship supports a
restrictive covenant with lawful consideration.
¶25 However, Friedlen argues, there is not a similar
exchange of benefits or detriments when an employer presents a
restrictive covenant to an existing at-will employee in return
for continued employment. Friedlen contends that a promise of
continued employment does not alter the situation of either the
employer or employee, except that the employee is now subject to
a restrictive covenant. Thus, Friedlen concludes, a restrictive
covenant lacks lawful consideration unless the employer offers
the employee something in addition to promising continued
employment.6
¶26 Runzheimer appears to minimize the vulnerable position
of an employee who has worked for the same employer for a number
of years. The employee may develop specialized skills and
6
Some examples of what may suffice as additional
consideration in states that require it include "increased
wages, a promotion, a bonus, a fixed term of employment, or
perhaps access to protected information." Labriola v. Pollard
Group, Inc., 100 P.3d 791, 794 (Wash. 2004) (en banc).
11
No. 2013AP1392
knowledge that would transfer smoothly to an equivalent position
for another employer——except for the newly established
restrictive covenant. These skills and knowledge may not
transfer so easily when a new position involves a different line
of work. Moreover, the employee may have grown much older and
acquired family responsibilities not present when the employee
was hired. The inability to transfer easily to an equivalent
job may reduce the employee's bargaining power to negotiate a
raise or bonus with the initial employer and may prevent the
employee from terminating the employment relationship on his own
timetable. By contrast, an employee at the beginning of the
employment relationship is likely to have more freedom to find
alternative employment because he or she may not be burdened
with some of these restraints.
¶27 Given these different circumstances, we decline to
rely exclusively on our holding in Lueth to conclude that an
employer's forbearance of its right to terminate an at-will
employee constitutes lawful consideration. Instead, we believe
a deeper analysis is required.
C. NBZ and Star Direct
¶28 Two cases closely related to this case are NBZ and
Star Direct. Both NBZ and Star Direct involved restrictive
covenants for at-will employees. Runzheimer utilizes these two
cases to argue that neither this court nor the Wisconsin Court
of Appeals has ruled that forbearance of the right to terminate
an at-will employee does not constitute lawful consideration for
a restrictive covenant. Friedlen, on the other hand, argues
12
No. 2013AP1392
that NBZ is not dispositive of the issue but that our holding in
Star Direct provides a ruling in his favor. The parties'
conflicting reliance on these two cases suggests that an
explanation of their holdings is necessary to clarify Wisconsin
law.
¶29 In NBZ, the court of appeals addressed whether lawful
consideration exists if an employer does not condition an
existing at-will employee's continued employment on signing a
restrictive covenant. NBZ, 185 Wis. 2d at 833. Studio 890, a
beauty salon in Elm Grove, Wisconsin, required its employee,
Paula Pilarski, to sign a covenant not to compete while she was
in training. Id. at 833-34. About one year later, Pilarski
left the salon and began working for one of Studio 890's
competitors. Id. at 834.
¶30 Studio 890 sued Pilarski, seeking a permanent
injunction which would require her to terminate her employment
at the competitor's salon. Id. The court of appeals first
concluded that a covenant not to compete must be supported by
consideration, as it is subject to both common law contract
principles and the Wisconsin Statutes.7 Id. at 836.
7
Wisconsin Stat. § 103.465 addresses 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
(continued)
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No. 2013AP1392
¶31 The court next addressed whether the covenant not to
compete was supported by consideration, as Pilarski signed the
covenant after her employment began. Id. at 838. The court
held that the covenant was not supported by consideration
because "the evidence [did] not show that Studio 890 conditioned
employment or promised to do anything in exchange for Pilarski's
signing the covenant." Id. at 839.
¶32 The holding in NBZ was limited to a determination that
a restrictive covenant between an employer and an existing at-
will employee lacks consideration when the employer neither
conditions the employee's continued employment on signing the
covenant nor promises to do anything else in exchange for
signing the covenant. This ruling did not affirmatively
determine whether lawful consideration would exist if an
employer expressly conditioned the existing at-will employee's
continued employment on his or her signing a proffered
restrictive covenant.
¶33 In Star Direct, this court addressed whether an
employer can require new at-will employees to sign restrictive
covenants when the employer does not require the same from
existing at-will employees. Eugene Dal Pra was a route salesman
working for CB Distributors before Star Direct purchased his
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.
14
No. 2013AP1392
route. Star Direct, 319 Wis. 2d 274, ¶7. Star Direct, wishing
to retain the business on Dal Pra's route, offered to hire him
on the condition that he sign a covenant not to compete. Id.,
¶¶7-8. After working for Star Direct for about four years, Dal
Pra quit and started his own competing company. Id., ¶12. Star
Direct sought injunctive relief to prevent Dal Pra from
violating his covenant not to compete. Id., ¶13.
¶34 Dal Pra argued that the covenant was unreasonable and
unnecessary because Star Direct required only its new employees,
not its existing employees, to sign covenants not to compete.
Id., ¶49. In response to Dal Pra's allegation, the owner of
Star Direct explained that "there was the obvious risk that the
current employees would not sign them if asked to, or would
leave and begin competing with Star Direct." Id., ¶50.
¶35 We disagreed with Dal Pra that Star Direct's
inconsistency amounted to unreasonableness or was unnecessary,
as Star Direct's hiring policies following the acquisition of CB
Distributors' routes remained consistent and proved that Star
Direct legitimately feared the possibility that the new
employees would later pose competitive risks. Id., ¶51. In
reaching our conclusion, we cited NBZ for the principle that
"employers may not compel their existing employees to sign
restrictive covenants without additional consideration." Id.,
¶50 (citing NBZ, 185 Wis. 2d at 837-39). However, the Star
Direct decision did not explain what would constitute
"additional consideration."
15
No. 2013AP1392
¶36 Based on the quoted statement in Star Direct, Friedlen
would like us to conclude that we have already addressed whether
forbearance of the right to terminate an at-will employee is
lawful consideration. According to Friedlen, our ruling in Star
Direct demonstrates that an employer's promise of continued
employment is not additional consideration. The circuit court
ultimately read Star Direct as saying that an employer's promise
of continued employment meant nothing because an at-will
employee can be terminated at will.
¶37 Friedlen's reliance on these cases is flawed. NBZ
tells us that no consideration exists when there is no evidence
to show that the employer conditioned employment or promised to
do anything in exchange for the employee's signing the covenant.
NBZ, 185 Wis. 2d at 839. Star Direct simply does not address
whether an employer's promise not to terminate the employment
relationship satisfies the "additional consideration"
requirement it describes. Therefore, Friedlen's contention that
we have already ruled on this issue is incorrect.
D. Application of Legal Principles
¶38 Jurisdictions throughout the country are split on
whether forbearance of the right to terminate an at-will
employee is lawful consideration for an employee's promise to
forego certain rights. However, the jurisdictions that hold
that a promise not to fire is not lawful consideration for a
covenant not to compete represent the "distinct minority."
Simko, Inc. v. Graymar Co., 464 A.2d 1104, 1107 (Md. Ct. Spec.
App. 1983).
16
No. 2013AP1392
¶39 Jurisdictions that rule forbearance of the right to
terminate an at-will employee is lawful consideration, on the
other hand, typically reason that employees are obtaining the
expectation of continued employment, which is not worthless or
illusory.8 The American Law Institute embraces this view. See
Restatement (Third) of Employment Law, Proposed Final Draft
§ 8.06 cmt. e (2014) ("Continuing employment of an at-will
employee is generally sufficient consideration to support the
enforcement of an otherwise valid restrictive covenant.").
¶40 In Wisconsin, "[f]orbearance in exercising a legal
right is valid consideration . . . ." Lovett v. Mt. Senario
8
See, e.g., Lucht's Concrete Pumping, Inc. v. Horner, 255
P.3d 1058, 1059-60 (Colo. 2011) (en banc); Summits 7, Inc. v.
Kelly, 886 A.2d 365, ¶20 (Vt. 2005) ("In either case, the
employee is, in effect, agreeing not to compete for a given
period following employment in exchange for either initial or
continued employment."); Lake Land Emp't Grp., LLC v. Columber,
804 N.E.2d 27, ¶19 (Ohio 2004) ("Where an employer makes such a
proposal by presenting his employee with a noncompetition
agreement and the employee assents to it, thereby accepting
continued employment on new terms, consideration supporting the
noncompetition agreement exists."); Camco, Inc. v. Baker, 936
P.2d 829, 832 n.7 (Nev. 1997) (per curiam) ("Courts have
concluded that in an at-will employment context 'continued
employment' is, as a practical matter, equivalent to the
employer's 'forbearance to discharge'; many courts have
concluded that the consideration is equally valid phrased as a
benefit to the employee or a legal detriment to the employer.");
Ackerman v. Kimball Int'l, Inc., 652 N.E.2d 507, 509 (Ind.
1995); Hogan v. Bergen Brunswig Corp., 378 A.2d 1164, 1167 (N.J.
App. Div. 1977) (per curiam); Sherman v. Pfefferkorn, 135 N.E.
568, 569 (Mass. 1922). Contra Labriola, 100 P.3d at 793; Poole
v. Incentives Unlimited, Inc., 548 S.E.2d 207, 209 (S.C. 2001);
Freeman v. Duluth Clinic, Ltd., 334 N.W.2d 626, 630 (Minn.
1983); Kadis v. Britt, 29 S.E.2d 543 (N.C. 1944).
17
No. 2013AP1392
Coll., Inc., 154 Wis. 2d 831, 837, 454 N.W.2d 356 (Ct. App.
1990) (citing Hammel v. Ziegler Fin. Corp., 113 Wis. 2d 73, 81,
334 N.W.2d 913 (Ct. App. 1983)). Accepting this principle, the
question remains: is promising not to fire an existing at-will
employee in exchange for the employee immediately signing a
restrictive covenant a valid example of "forbearance in
exercising a legal right?" If so, then the restrictive covenant
Friedlen signed is supported by lawful consideration.
¶41 Wisconsin has long recognized the employment-at-will
doctrine. See Prentiss v. Ledyard, 28 Wis. 131, 133 (1871).
Under the employment-at-will doctrine, an employer has the right
to "discharge an employee 'for good cause, for no cause, or even
for cause morally wrong, without being thereby guilty of legal
wrong.'" Brockmeyer v. Dun & Bradstreet, 113 Wis. 2d 561, 567,
335 N.W.2d 834 (1983) (citation omitted).
¶42 Wisconsin has an exception to the at-will doctrine
that provides employees with 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." Id.
at 573. A "narrowly circumscribed public policy exception" to
the at-will doctrine is in the interest of the public,
employers, and employees because it simultaneously protects the
mobility of the workforce while recognizing employers' need to
adapt to changing economic conditions. Id. at 574.
¶43 One way an employer may respond to changing economic
conditions is to reduce the risk that former employees will
compete and take business from the company. Many employers
18
No. 2013AP1392
require employees to sign restrictive covenants to ameliorate
this risk. Restrictive covenants are enforceable in Wisconsin
as long as the restrictions are reasonable. See Wis. Stat.
§ 103.465.
¶44 Thus, if Friedlen had not signed the restrictive
covenant and Runzheimer had fired him as a result, the firing
would not have fallen under Wisconsin's public policy exception.
However, Runzheimer did not exercise its right to terminate
Friedlen's employment. Instead, Runzheimer exchanged its right
to fire Friedlen for Friedlen's promise not to compete with
Runzheimer upon his leaving the company.
¶45 Friedlen argues that Runzheimer's promise not to fire
him was illusory. A contract is illusory when it is
"'conditional on some fact or event that is wholly under the
promisor's control and his [or her] bringing it about is left
wholly to his [or her] own will and discretion . . . .'" Metro.
Ventures, LLC v. GEA Assocs., 2006 WI 71, ¶33, 291 Wis. 2d 393,
717 N.W.2d 58 (alteration in original) (quoting Nodolf v.
Nelson, 103 Wis. 2d 656, 660, 309 N.W.2d 397 (Ct. App. 1981)).
Put another way, "[t]he fundamental element of [an illusory]
promise is a promisor's expression of intention that the
promisor's future conduct shall be in accord with the present
expression, irrespective of what the promisor's will may be when
19
No. 2013AP1392
the time for performance arrives."9 1 Joseph M. Perillo, Corbin
on Contracts § 1.17, at 47 (Rev. ed. 1993) (emphasis added).
¶46 Runzheimer's promise not to fire Friedlen if he signed
the covenant was not illusory because it was not a promise
implicating Runzheimer's future discretionary conduct. Rather,
Runzheimer's promise was that it would not fire Friedlen at that
time and for that reason. Thus, Runzheimer performed
immediately when it forbore its legal right to fire Friedlen at
that time.10
¶47 An at-will employee has just as much power to
terminate the employment relationship as the employer does.
Runzheimer promised not to exercise its legal right to end the
employment relationship in exchange for Friedlen signing the
9
The prototypical example of an illusory promise is
described in Corbin on Contracts: "X guarantees payment of P's
note in return for C's written promise to forbear from suing P
as long as C wishes to forbear. In this case C's words may
create the illusion of a promise, but in fact, C has made no
promise." 1 Joseph M. Perillo, Corbin on Contracts § 1.17, at
47 (Rev. ed. 1993).
10
This differs from the example in Corbin on Contracts
because Runzheimer's decision not to fire Friedlen carried with
it the implicit expectation——though not a promise——of continued
employment after the restrictive covenant was signed.
The concurring opinion of Chief Justice Abrahamson contends
that Runzheimer's promise that it would not fire Friedlen at
that time and for that reason if he signed the restrictive
covenant is illusory, and that Runzheimer must have promised
"not to fire Friedlen without cause for a reasonable period of
time." Concurrence, ¶¶67, 68. Neither of these contentions is
consistent with the majority opinion and they do not represent
the majority view.
20
No. 2013AP1392
covenant. Friedlen signed, and the contract was formed. In
fact, we have repeatedly recognized the existence of lawful
consideration in the inverse situation——when an at-will employee
continues working for the employer in exchange for a
modification or addition to the employment agreement.11 In these
situations, the employer is not getting "additional
consideration" for the employee's continued employment, and, in
the absence of an employment contract, the employee is still
free to leave in the future.
¶48 Moreover, to allow the forbearance of the right to
terminate an at-will employee to constitute lawful consideration
avoids the temptation for employers to circumvent the law. If
we were to hold that consideration beyond continued employment
is necessary in cases like this, an employer might simply fire
11
See Ferraro v. Koelsch, 124 Wis. 2d 154, 168-69 n.5, 368
N.W.2d 666 (1985) (an employee gives lawful consideration for an
employer's promise of a raise or bonus when the employee chooses
to stay on the job because "[h]e has in effect given up his
right to quit, at least temporarily") (citation omitted);
Prochniak v. Wis. Screw Co., 265 Wis. 541, 547, 61 N.W.2d 882
(1953) ("[Employee's] agreement to continue working for
defendant under an arrangement whereby the overdraft would be
wiped out and higher commissions would be paid is sufficient
consideration for cancellation of the debt."); see also Tinder
v. Pinkerton Sec., 305 F.3d 728, 734 (7th Cir. 2002) ("Wisconsin
recognizes that, because at-will employees are free to quit
their jobs at any time, at-will employees give adequate
consideration for employer promises that modify or supplant the
at-will employment relationship by remaining on the job.");
Pincus v. Pabst Brewing Co., 893 F.2d 1544, 1549 (7th Cir. 1990)
("[T]he promise of a right of first refusal provided by Pabst
[employer] was exchanged for the promise by Pincus [employee] to
continue employment under changed circumstances.").
21
No. 2013AP1392
an existing at-will employee and then re-hire the employee the
next day with a covenant not to compete. See Curtis 1000, Inc.
v. Suess, 24 F.3d 941, 947 (7th Cir. 1994). It is more
appropriate for forbearance of the right to fire an existing at-
will employee to constitute lawful consideration.
¶49 It is of no consequence that Runzheimer's promise not
to fire Friedlen was for an indeterminate period of time because
the length of the promise's duration goes to the adequacy of
consideration, not the existence of lawful consideration. We
have previously stated that we will not address the adequacy of
consideration:
"[A] valuable consideration however small is
sufficient to support any contract; . . . inadequacy
of consideration alone is not a fatal defect." The law
concerns itself only with the existence of legal
consideration because "the adequacy in fact, as
distinguished from value in law, is for the parties to
judge for themselves." A consideration of even an
indeterminate value, incapable of being reduced to a
fixed sum, can be sufficient to constitute legal
consideration.
St. Norbert Coll. Found., Inc. v. McCormick, 81 Wis. 2d 423,
430-31, 260 N.W.2d 776 (1978) (internal citations omitted).
¶50 Therefore, we need not weigh Friedlen's promise not to
compete against Runzheimer's promise not to fire him. Lawful
22
No. 2013AP1392
consideration existed, as both parties agreed to give up a legal
right. The inquiry ends there.12
E. Other Principles
¶51 It is true that shortly after Friedlen signed the
covenant, Runzheimer could have fired him. This possibility
motivated the circuit court's decision, which reasoned that the
potential of Friedlen's immediate firing rendered any purported
consideration by Runzheimer "illusory."
¶52 The circuit court erred when it relied on the fear of
immediate termination to determine that Runzheimer's promise was
12
We do not necessarily treat new at-will employees exactly
the same as existing at-will employees in all circumstances. A
new at-will employee has relatively equal bargaining power to
the employer, whereas in an established relationship, the
employer often has more bargaining power than the employee due
to the employee's reliance on his or her employment income,
fringe benefits, and other considerations.
However, in an established employment relationship, the
consequences to the employer of an employee's departure to work
for a competitor may sometimes be much greater than they would
be early in the relationship. For example, an employer may
expend substantial resources over a long period of time to help
one of its employees establish personal relationships with
clients and potential clients. If such an employee were not
subject to a restrictive covenant, he or she might hold
significantly more bargaining power than the employer, as his or
her departure to a competitor could severely damage the
employer's interests as well as the interests of other
employees.
Thus, there is no overriding policy concern that would
require substantially greater protections of existing employees
than new employees in terms of the consideration required to
form an enforceable restrictive covenant.
23
No. 2013AP1392
illusory. Existing contract principles adequately address such
a situation.
¶53 First, in First National Bank & Trust Co. v. Notte, 97
Wis. 2d 207, 209, 293 N.W.2d 530 (1980), we stated that "if a
party to a contract is induced to manifest his assent to the
contract by [] means of a fraudulent or material
misrepresentation by another party to the contract, the contract
is voidable if the recipient justifiably relies on the
misrepresentation." Thus, an employee who relies on an
employer's promise that he will not be fired if he signs a
covenant not to compete would likely have a voidable contract,
subject to rescission, if he were fired shortly after signing.
¶54 Second, an employer acting in such a deceitful manner
may be breaching the doctrine of good faith and fair dealing.
We have stated that "[e]very contract implies good faith and
fair dealing between the parties to it . . . ." Beidel v.
Sideline Software, Inc., 2013 WI 56, ¶27, 348 Wis. 2d 360, 842
N.W.2d 240 (quoting Chayka v. Santini, 47 Wis. 2d 102, 107 n.7,
176 N.W.2d 561 (1970)). As we explained in Beidel, Wisconsin
disfavors "following the letter but not the spirit of an
agreement, and . . . it [is] deemed a violation of the covenant
of good faith and fair dealing to do so." Id.
¶55 When an employer promises not to fire an existing at-
will employee if the employee agrees to sign a restrictive
covenant, the employer violates the spirit of the agreement when
the employer fires the employee moments after the employee signs
the covenant. Firing the employee moments after the agreement
24
No. 2013AP1392
is executed would accomplish "exactly what the agreement of the
parties sought to prevent," which constitutes an independent
breach, id., ¶28 (citation omitted), and would make the
restrictive covenant unenforceable. The modification in the
employment relationship when an existing at-will employee signs
a restrictive covenant is the restrictive covenant, not a new
employment contract of reasonable duration; and it is the
modification that would become unenforceable if the employer
acts in bad faith.
¶56 Friedlen argues that reliance on contract principles
as remedies for misrepresentation or fraud places too heavy a
burden on employees. He contends that employees who encounter
an employer who obtains a restrictive covenant in bad faith will
be required to "engage counsel, bring suit, meet a burden of
proof, and obtain the highly unusual remedy of rescission, all
at great economic expense." Yet, employees who wish to
establish that any restrictive covenant is unlawful must bear
the same burden, as the "burden of proving failure of
consideration" is on the party seeking to avoid the contract.
Jax v. Jax, 73 Wis. 2d 572, 586, 243 N.W.2d 831 (1976). Our
determination of what constitutes lawful consideration does not
change how contract disputes are litigated.
¶57 Normally, an employer that requires an employee to
sign a restrictive covenant does so because the employer
believes the employee is valuable and does not want to terminate
the employment relationship. Most employees "think it unlikely
they will be fired as long as their work is satisfactory and the
25
No. 2013AP1392
firm does not encounter rough weather." Curtis 1000, 24 F.3d at
946. As Judge Richard Posner has stated, "Employers pay a price
if they get a reputation for tricky dealings with their
employees." Id.
¶58 Finally, it is worth noting that Wisconsin law allows
for the enforcement of contracts that would otherwise fail for
lack of consideration when there has been consideration-in-fact
after the formation of the contract. See Oby, 52 Wis. 2d at 8.
Thus, although the parties did not argue the case in this way,
it is likely that Runzheimer could have prevailed in the circuit
court under a theory that Friedlen's actual continued employment
for 29 months constituted lawful consideration.
III. CONCLUSION
¶59 In conclusion, we hold that an employer's forbearance
in exercising its right to terminate an at-will employee
constitutes lawful consideration for a restrictive covenant.
Although, theoretically, an employer could terminate an
employee's employment shortly after having the employee sign a
restrictive covenant, the employee would then be protected by
other contract formation principles such as fraudulent
inducement or good faith and fair dealing, so that the
restrictive covenant could not be enforced.
¶60 In this case, the circuit court made no determination
as to the reasonableness of the covenant's terms. Because the
record and arguments before this court are undeveloped on the
issue of reasonableness, we decline to address it. We therefore
reverse the decision of the circuit court, and remand the cause
26
No. 2013AP1392
to the circuit court for further proceedings consistent with
this opinion.
By the Court.—The judgment of the circuit court is reversed
and the cause is remanded.
27
No. 2013AP1392.ssa
¶61 SHIRLEY S. ABRAHAMSON, C.J. (concurring). The
instant case involves a dispute between an employer (Runzheimer
International, Ltd.) and one of its former employees (David
Friedlen) over the enforceability of a covenant not to compete.
The question presented is whether a covenant not to compete
between an employer and an existing at-will employee is
supported by consideration from the employer.1
¶62 When Friedlen signed the covenant not to compete, he
had been working for Runzheimer as an at-will employee for over
15 years. Runzheimer did not promise to continue employing
Friedlen if he signed the covenant. Rather, Runzheimer informed
Friedlen that he would be fired if he chose not to sign the
covenant.2
¶63 Friedlen signed the covenant not to compete. He was
fired roughly two years later.
¶64 The majority opinion holds that Runzheimer provided
consideration for Friedlen's signing the covenant not to
compete. An internal contradiction, however, pervades the
majority opinion and renders its holding ambiguous and
troublesome.
¶65 On the one hand, the majority opinion concludes that
Runzheimer promised not to "fire Friedlen at that time and for
1
For a discussion of this question, see, e.g., 1 E. Allan
Farnsworth, Farnsworth on Contracts § 2.10(b) (3d ed. 2004).
2
Majority op., ¶2.
1
No. 2013AP1392.ssa
that reason." Runzheimer therefore "performed immediately,"
according to the majority opinion, "when it forbore its legal
right to fire Friedlen at that time."3 In other words,
Runzheimer's forbearance from immediately firing Friedlen
constituted consideration for Friedlen's signing the covenant
not to compete.
¶66 On the other hand, the majority opinion determines
that Runzheimer's right to fire Friedlen shortly after having
him sign a covenant not to compete was only "theoretical."4 If
Friedlen had been fired shortly after signing the covenant, then
according to the majority opinion, Friedlen could have brought
suit to prevent the covenant's enforcement. More specifically,
the majority opinion holds that Friedlen would be protected by
"contract formation principles such as fraudulent inducement or
good faith and fair dealing, so that the restrictive covenant
could not be enforced."5
¶67 As I see it, if Runzheimer promised to forbear only
from immediately firing Friedlen, then the promise was illusory
and cannot serve as consideration. Further, for the doctrines
of fraudulent inducement and good faith and fair dealing to
protect Friedlen from being fired shortly after signing the
covenant not to compete, Runzheimer must have promised to do
more than forbear from immediately firing Friedlen; it must have
3
Id., ¶46.
4
Id., ¶¶5, 59.
5
Id., ¶5.
2
 No. 2013AP1392.ssa
made an implicit promise not to fire Friedlen without cause for
a reasonable period of time.
¶68 Thus, to hold that the covenant not to compete is
supported by consideration from Runzheimer, and to hold that the
doctrines of fraudulent inducement and good faith and fair
dealing would protect Friedlen if he were fired shortly after
signing the covenant not to compete, the majority opinion in
effect transforms the parties' at-will employment contract into
an employment contract for a reasonable duration. Understood
this way, I agree with the majority opinion.
¶69 I write separately to explain my position.
I
¶70 I begin by examining the majority opinion's stated
interpretation of the promise Runzheimer made in exchange for
Friedlen's signing the covenant not to compete.
¶71 According to the majority opinion, Runzheimer provided
consideration for the covenant not to compete by promising not
to "fire Friedlen at that time and for that reason."6 In other
words, the majority opinion interprets Runzheimer's promise as
nothing more than a promise to forbear from immediately
terminating Friedlen's at-will employment. The majority opinion
concludes that this promise was not illusory.
¶72 As the majority opinion explains, a promise is
illusory "when it is conditional on some fact or event that is
wholly under the promisor's control and his [or her] bringing it
6
Id., ¶46.
3
 No. 2013AP1392.ssa
about is left wholly to his [or her] own will and
discretion . . . ."7 The majority opinion refers in a footnote
to the prototypical example of an illusory promise described in
Corbin on Contracts, which is as follows: "X guarantees payment
of P's note in return for C's written promise to forbear from
suing P as long as C wishes to forbear."8 Corbin on Contracts
explains that "C's words may create the illusion of a promise,
but in fact, C has made no promise."9
¶73 There is no meaningful distinction, in my opinion,
between C's promise in Corbin's prototypical example and
Runzheimer's promise to Friedlen, if all Runzheimer promised was
to forbear from terminating Friedlen's at-will employment for as
long as Runzheimer wished to forbear. C's forbearance was left
wholly to C's will and discretion. Runzheimer's forbearance
from firing Friedlen was left wholly to Runzheimer's will and
discretion. C promised to forbear for as long as C wished to
forbear. Runzheimer promised to forbear from firing Friedlen
for as long as Runzheimer wished to forbear.
¶74 Thus, if Runzheimer promised to forbear only from
immediately firing Friedlen, then in my view Runzheimer's
promise to Friedlen was illusory. Accordingly, under this
7
Majority op., ¶45 (internal quotation marks omitted)
(quoting Metro. Ventures, LLC v. GEA Assocs., 2006 WI 71, ¶33,
291 Wis. 2d 393, 717 N.W.2d 58).
8
Majority op., ¶45 n.9 (citing 1 Joseph M. Perillo, Corbin
on Contracts § 1.17, at 47 (Rev. ed. 1993).
9
Majority op., ¶45 n.9 (citing 1 Joseph M. Perillo, Corbin
on Contracts § 1.17, at 47 (Rev. ed. 1993).
4
No. 2013AP1392.ssa
interpretation of Runzheimer's promise, Runzheimer failed to
provide consideration for Friedlen's signing the covenant not to
compete.10
¶75 The majority opinion seems to recognize that the
promise to forbear from immediately terminating an at-will
employee is illusory. The majority opinion states that under
its interpretation of Runzheimer's promise, Runzheimer
"theoretically" could have fired Friedlen shortly after Friedlen
signed the covenant not to compete.11 The majority opinion
contends, however, that if Runzheimer had fired Friedlen shortly
after Friedlen signed the covenant not to compete, then Friedlen
would "be protected by other contract formation principles such
as fraudulent inducement or good faith and fair dealing, so that
the restrictive covenant could not be enforced."12
¶76 I turn to an examination of these contract doctrines
as they apply in the instant case.
II
¶77 If Runzheimer promised only to forbear from
immediately terminating Friedlen's at-will employment, then I
fail to see how Friedlen could prevail on a claim of fraudulent
inducement or breach of the covenant of good faith and fair
10
Devine v. Notter. 2008 WI App 87, ¶4, 312 Wis. 2d 521,
753 N.W.2d 557 ("If a party to a purported contract has, in
fact, made only illusory promises and therefore not constrained
him- or herself in any way, he or she has given no consideration
and therefore no contract exists.").
11
Majority op., ¶¶5, 59.
12
Id.
5
No. 2013AP1392.ssa
dealing if he were fired shortly after signing the covenant not
to compete.
¶78 I conclude that by invoking these contract doctrines,
the majority opinion reinterprets Runzheimer's promise to
Friedlen to be more than a promise to forbear from firing
Friedlen for as long as Runzheimer wished to forbear. The
majority opinion is in effect holding that Runzheimer implicitly
promised not to terminate Friedlen's employment for a reasonable
time. Unless Runzheimer's promise is so interpreted, the
doctrines of fraudulent inducement and good faith and fair
dealing are not applicable to the instant case.
¶79 A brief examination of the doctrines of fraudulent
inducement and good faith and fair dealing will illustrate my
point.
¶80 First, fraudulent inducement occurs when the
"fraudulent behavior" of one party to a contract undermines the
capacity of the other party to "make an informed decision."13 A
party engages in "fraudulent behavior" by knowingly or
recklessly making a false statement when that statement is
intended to defraud the other party and induce him or her to act
13
Digicorp, Inc. v. Ameritech Corp., 2003 WI 54, ¶48, 262
Wis. 2d 32, 662 N.W.2d 652 (quoting Huron Tool & Eng'g Co. v.
Precision Consulting Serv., Inc., 532 N.W.2d 541, 545 (Mich. Ct.
App. 1995)).
6
No. 2013AP1392.ssa
upon it, and when the other party in fact believes the false
statement and relies upon it to his or her detriment.14
¶81 Thus, to show that Runzheimer fraudulently induced
Friedlen to sign the covenant not to compete, Friedlen would be
required to demonstrate that Runzheimer made a false statement.
If all Runzheimer promised was to forbear from terminating
Friedlen's at-will employment at that time, what false statement
did Runzheimer make? The answer seems to be none. After all,
the whole point of at-will employment is that either party can
terminate the employment relationship at any time.15
¶82 Second, the implied covenant of good faith and fair
dealing reflects the "common disfavor for following the letter
but not the spirit of an agreement."16 "Every contract implies
good faith and fair dealing between the parties . . . ."17 The
14
Kaloti Enters., Inc. v. Kellogg Sales Co., 2005 WI 111,
¶12, 283 Wis. 2d 555, 699 N.W.2d 205. See also First Nat'l Bank
& Trust Co. v. Notte, 97 Wis. 2d 207, 223 n.7, 293 N.W.2d 530
(1980) (explaining that to void a contract on the basis of
fraudulent inducement, the party seeking rescission must
demonstrate that the other party to the contract intentionally
misrepresented the facts "to induce a party to manifest his
assent . . . " (quoting Restatement (Second) of Contracts,
§ 304(1) (Tent. Draft No. 11, 1976))).
15
See Brockmeyer v. Dun & Bradstreet, 113 Wis. 2d 561, 567,
335 N.W.2d 834 (1983); see also id. at 579 (Day, J., concurring)
("'At will' contracts are employment contracts that . . . have
no time duration and may be terminated at will by the employer
or employee at any time 'for any reason or for no reason'"
(emphasis added).).
16
Beidel v. Sideline Software, Inc., 2013 WI 56, ¶27, 348
Wis. 2d 360, 842 N.W.2d 240.
17
Id., ¶27.
7
 No. 2013AP1392.ssa
doctrine of good faith and fair dealing may not be invoked,
however, "to undo express terms of an agreement."18 In other
words, when "a contracting party complains of acts of the other
party which are specifically authorized in their agreement," the
court will not find "any breach of the covenant of good faith."19
¶83 Thus, to show that Runzheimer breached the implied
covenant of good faith and fair dealing, Friedlen cannot
complain of acts specifically authorized by his agreement with
Runzheimer. If all Runzheimer promised was to forbear from
immediately terminating Friedlen's at-will employment, on what
basis could Friedlen assert a breach of the covenant of good
faith and fair dealing had Runzheimer fired Friedlen shortly
after he signed the covenant not to compete? The answer seems
to be none. An at-will employment contract specifically
authorizes the employer to fire the employee at any time and for
any reason.
¶84 I conclude that Friedlen's claims of fraudulent
inducement and good faith and fair dealing are doomed to failure
if Runzheimer promised to forbear only from immediately firing
Friedlen. In contrast, if Runzheimer is viewed as implicitly
promising not to terminate its employment relationship with
Friedlen for a reasonable time, then had Runzheimer fired
Friedlen shortly after he signed the covenant not to compete,
18
Id., ¶29.
19
Super Valu Stores, Inc. v. D-Mart Food Stores, Inc., 146
Wis. 2d 568, 577, 431 N.W.2d 721 (Ct. App. 1988) (emphasis
added).
8
No. 2013AP1392.ssa
Friedlen would have had a viable claim of fraudulent inducement
or breach of the covenant of good faith and fair dealing.
¶85 The majority opinion's reliance on the doctrines of
fraudulent inducement and good faith and fair dealing therefore
means that the majority opinion views Runzheimer as implicitly
promising to refrain from firing Friedlen for a reasonable time
after Friedlen signed the covenant not to compete. This
promise, unlike a promise of continued at-will employment, is
not illusory.
* * * *
¶86 The majority opinion follows two contradictory paths:
It states that Runzheimer promised to forbear from firing
Friedlen immediately, but implies that Runzheimer promised to
forbear from firing Friedlen for a reasonable time. It states
that a promise to forbear from immediately firing Friedlen
constitutes consideration for Friedlen's signing the covenant
not to compete, but concludes that the covenant could not be
enforced if Friedlen had been fired shortly after signing it.
¶87 Runzheimer did not fire Friedlen for two years after
Friedlen signed the covenant. Runzheimer views the substantial
period of Friedlen's employment following Friedlen's signing the
covenant not to compete as supplying any consideration that may
have been missing at the time Friedlen signed the covenant. The
majority opinion seems to agree.
¶88 Cases are collected by the majority opinion and in the
Reporters' Notes to Comments e. and f. to § 8.06 of the
Restatement (Third) of Employment Law, Proposed Final Draft
9
No. 2013AP1392.ssa
(2014). These cases are all over the map, but many states hold
that a promise of continued indefinite employment is
consideration for a restrictive covenant signed by an existing
at-will employee. Some of these cases find consideration in an
implied promise to forbear from firing the employee for a
substantial time after the covenant is signed,20 and others find
it in the fact of continued employment for a substantial time
after the covenant is signed.21
¶89 Thus, cases from various jurisdictions support my view
that the covenant not to compete at issue in the instant case
was supported by consideration from Runzheimer if Runzheimer is
viewed as having implicitly promised to forbear from firing
Friedlen for a reasonable time. I understand the majority
opinion as in effect holding just that: In exchange for
Friedlen's signing the covenant not to compete, Runzheimer
promised not to terminate Friedlen's employment for a reasonable
time. I therefore agree with the majority opinion.
¶90 For the reasons set forth, I write separately.
20
See, e.g., Crowell v. Woodruff, 245 S.W.2d 447, 449-50
(Ky. Ct. App. 1951) (holding that a non-compete agreement
entered into by an existing employee was "dubious" for "lack of
mutuality," and that "[t]here must be read into the contract an
implied obligation to retain [the employee for] such period of
time as would deserve the right to enforce the [non-compete
agreement]").
21
See, e.g., Simko, Inc. v. Graymar Co., 464 A.2d 1104,
1107-08 (Md. App. 1983) ("[T]he continuation of employment for a
substantial period beyond the threat of discharge is sufficient
consideration for a restrictive covenant.").
10
No. 2013AP1392.ssa
1