Jan. 21, 2010 – Without determining whether a recent Wisconsin Supreme Court decision has amended a long-standing test for the enforceability of employment contract clauses, the Wisconsin Court of Appeals found valid an employer’s tuition reimbursement provision.
In Frank D. Gillitzer Electric Co.v. Andersen, 2009AP939, five former Gillitzer employees argued that the company could not attempt to recover the cost of their apprenticeship program because it was a restrictive covenant inextricably linked to a non-compete clause which even the company admitted was unenforceable.
The employees persuaded the circuit court that the employment contract failed the divisibility test for restrictive covenants set forth in Streiff v. American Family Mut. Ins. Co., 118 Wis. 2d 602 (1984). Following Streiff, a court conducts a fact-intensive analysis of the contract language to determine whether the restrictive provisions are intertwined in such a way that they must be read together to determine the meaning of each.
Before the court of appeals, the company argued that the supreme court imposed a new test for divisibility in Star Direct v. Dal Pra, 2009 WI 76. Under Star Direct, a reasonably restrictive provision is divisible from an unreasonable provision when the provisions are not “textually linked” such that a court may strike the unreasonable portion and the other clause remains understandable and independently enforceable.
In a Jan. 20 opinion by Judge Kitty Brennan, the court of appeals said that it did not have to decide whether the Star Direct test is new and different from that in Streiff because the Gillitzer employment contract would pass either.
Analyzing the contract, the court found that the first three paragraphs outlined the employer’s promise to pay for a five-year training program in exchange for the employee’s pledge to maintain a passing grade and to comply with school rules, with an additional stipulation that the company would be reimbursed if the employee fails to complete the schooling or leaves the company within four years of completing training.
These paragraphs can be independently read and understood, the court said. “There is no need to read the non-compete provisions (paragraphs four and five) to discern the meaning of the training reimbursement requirement,” the court wrote.
Further, the court noted that the two provisions do not share “identical factual triggers” as did the offending clauses in Streiff. “Here, the repayment requirement is triggered by any one of three things, two of which trigger repayment even if the employee stays employed at Gillitzer – quitting the program and receiving a failing grade,” the court wrote.
