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The Wisconsin Supreme Court recently held in Heyde Companies, Inc. v. Dove Health Care, LLC, that a no-hire provision between a supplier of health care employees and its customer that restricted the employment opportunities of employees without their knowledge and consent was not enforceable. The Court concluded the no-hire provision was harsh and oppressive to the employee and contrary to public policy because the employees who the no-hire provision covered did not know about it, and therefore, did not agree to it.
The decision will probably invalidate most, if not all, no-hire provisions in the contracts that staffing agencies enter into with their customers. The decision also raises questions about the enforceability of "no-raid" provisions in agreements between employers and employees. Staffing companies that want to ensure an enforceable no-hire provision with a customer will need to obtain the covered employees' consent to such a provision, which may be impractical. Another alternative is to enter into an enforceable covenant not to compete directly with the covered employees.
The enforceability of "no raid" provisions that are often part of covenants not to compete are also in question. Such no raid provisions commonly say the employee agrees not to solicit or induce other employees to leave their current employer. Such provisions can now be found unenforceable because the employees did not agree to them. Employers may wish to review the enforceability of any covenants not to compete that they have entered into with their employees, customers and suppliers.
For more information on Heyde Companies, Inc. v. Dove Health Care, LLC, see our January 2003 Issue of the Month, Some Promises Can Be Broken - Wisconsin Supreme Court Limits the Enforceablility of No Hire Clauses, Covenants Not to Compete, and No Raid Provisions at www.krukowski.com.
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