The Wisconsin Court of Appeals recently ruled in favor of dermatologist Burt J. Steffes, reversing a lower court's decision regarding his retirement benefits under the Fond du Lac Regional Clinic's plan. The court found that a restrictive covenant in the retirement plan was invalid and unenforceable. This ruling could have significant implications for similar employment agreements in Wisconsin.
Steffes, who began working at the Fond du Lac Regional Clinic in 2009, became a shareholder-employee in 2011. As part of his employment, he signed a contract that included a non-compete clause, which prohibited him from practicing in his medical specialty within ten miles of the clinic for two years after leaving. In 2017, an amended retirement plan was introduced, which included provisions that penalized employees who competed with the clinic after leaving. Steffes resigned in 2018 when he was 90% vested in the plan and opened a new practice outside of the geographic restrictions but within the counties defined by the plan's covenant.
After Steffes' request for a waiver of the non-compete clause was denied, he filed a claim for retirement benefits, which was also denied. He subsequently sued the clinic and the retirement plan, arguing that the denial was wrongful and that the restrictive covenant was invalid under Wisconsin law. The circuit court ruled in favor of the clinic and the plan, stating that the covenant was enforceable. Steffes appealed the decision.
The Court of Appeals reviewed the case and found that the circuit court had erred in its ruling. The court stated, "Because we conclude that the court erred, we reverse and remand." Judge Gundrum, along with Judges Neubauer and Grogan, presided over the case. The court determined that the restrictive covenant fell under the provisions of Wisconsin Statute § 103.465, which governs the enforceability of restrictive covenants in employment contracts.
The court explained that WIS. STAT. § 103.465 applies to covenants that restrict an employee's ability to compete after leaving their employer. It stated, "No one disputes that the restrictive covenant constitutes '[a] covenant by an assistant, servant or agent [Steffes] not to compete with his … employer or principal [the Clinic] … after the termination of that employment or agency.'" The court emphasized that the covenant's restrictions must be reasonably necessary to protect the employer's interests, or they would be deemed void.
In its analysis, the court referenced previous cases, including Union Central Life Insurance Co. v. Balistrieri and Holsen v. Marshall & Ilsley Bank, which established that restrictive covenants in employment agreements must adhere to the standards set forth in § 103.465. The court noted that the clinic and the plan did not contest that the restrictive covenant was void if the statute applied. The court concluded that the covenant was indeed invalid and unenforceable under the statute.
This ruling could have far-reaching implications for similar cases in Wisconsin. It reinforces the notion that restrictive covenants in employment agreements, especially those related to retirement benefits, must comply with state law to be enforceable. The decision may encourage employees to challenge overly broad non-compete clauses that could hinder their ability to work in their field after leaving an employer.
Looking ahead, it remains to be seen whether the Fond du Lac Regional Clinic will appeal this decision to the Wisconsin Supreme Court. The court's ruling sets a precedent that could influence how restrictive covenants are viewed in future employment contracts. As the legal landscape continues to evolve, both employers and employees will need to navigate these agreements carefully to ensure compliance with state laws.