Facts
- Milwaukee Linen Supply Co. (Milwaukee Linen) furnished towels and shop and office linens to customers through regular delivery routes.
- Ring worked for Milwaukee Linen for years as a route deliveryman serving the company’s customers.
- In 1930, Milwaukee Linen appointed Ring to a higher position and increased his pay.
- As part of that change in position and pay, Ring signed a written agreement containing a post-employment restriction.
- The agreement provided that for two years after his employment ended, Ring would not solicit or divert Milwaukee Linen’s customers (including customers on the route or in the area he had served).
- The employment relationship remained terminable at will.
- In 1932, Milwaukee Linen discharged Ring.
- Ring had a physical disability and, after his discharge, was unable to find acceptable work outside the linen-supply business, the line of work he knew.
- Ring took work as a driver for a competitor of Milwaukee Linen.
- Milwaukee Linen claimed Ring’s new employment involved solicitation or diversion of Milwaukee Linen’s customers and sued for an injunction to enforce the restriction.
- The trial court found the restriction was not reasonably necessary to protect Milwaukee Linen’s business and was unduly harmful to Ring, denied injunctive relief, and entered judgment for Ring.
- Milwaukee Linen appealed.
Issues
- Whether Milwaukee Linen was entitled to an injunction enforcing a two-year post-employment covenant restricting Ring from soliciting or diverting Milwaukee Linen’s customers after Milwaukee Linen discharged him from at-will employment.
- Whether, on these facts, the covenant was a reasonable restraint (reasonably necessary to protect the employer) or an unreasonable restraint imposing undue hardship on the employee.
Decision
- The Wisconsin Supreme Court affirmed the judgment for Ring.
- The court agreed that Milwaukee Linen had not shown the restraint was reasonably necessary to protect its business.
- The court also agreed that enforcing the restriction would work an undue hardship on Ring given his circumstances, including his disability and limited ability to obtain other work.
- Because the covenant was unreasonable on these facts, Milwaukee Linen was not entitled to injunctive relief.
Legal Principles
- Post-employment restraints are enforceable only to the extent they are reasonable and no broader than necessary to protect the employer’s legitimate business interests.
- In deciding whether to grant an injunction, courts consider both the employer’s need for protection (such as customer relationships and goodwill) and the burden placed on the employee’s ability to earn a living.
- A restraint may be denied equitable enforcement when it is not shown to be necessary for the employer’s protection or when its effect is harsh and oppressive to the employee.
- The fact that the employer can terminate the relationship at will is relevant to the equity of enforcing a lengthy post-employment restriction after discharge.
Conclusion
Milwaukee Linen Supply Co. v. Ring holds that a two-year covenant barring a former route employee from soliciting or diverting the employer’s customers will not be enforced by injunction when the employer fails to show the restraint is reasonably necessary for its protection and enforcement would impose an undue hardship on the discharged employee, particularly where the employment was at will and the employee’s disability and work history limited other job options.