As we’ve written about in the past, the Wisconsin Legislature and the Supreme Court of Wisconsin have restricted employers’ attempts to limit the activities of former employees, when they’ve moved to new employers. Last month, the Supreme Court of Wisconsin limited an employer’s contract provision prohibiting a former employee from soliciting current employees. In The Manitowoc Company, Inc. v. Lanning, the Court held in favor of John Lanning, affirming the decision of the lower court. The dispute began in January, 2010, when Lanning, the chief engineer of the Manitowoc Company’s (“Manitowoc”) construction crane division, informed Manitowoc that he resigned his employment on January 6, 2010. Two days later, he began new employment with Manitowoc’s direct competitor, SANY America. On a dozen occasions, Lanning contacted Manitowoc employees in an effort to recruit them to his new employer. Manitowoc learned of these communications and sued Lanning, asserting that his conduct violated the non-solicitation of employees (NSE) provision of the employment contract he had executed with Manitowoc. Lanning argued that the provision was not enforceable and was an invalid restraint on trade. The trial court sided with Manitowoc, awarding the company just under $100,000 in damages, $1,000,000.00 in attorneys’ fees and $37,000 in litigation expenses.
On appeal before the Court of Appeals, the NSE provision was invalidated as violating Wis. Stat. § 103.465. The Supreme Court of Wisconsin granted Manitowoc’s petition for review. On January 19, 2018, the Supreme Court held that Manitowoc’s NSE provision was (1) subject to the statute; and (2) a violation of that statute. Manitowoc first tried to assert that its NSE provision was not a “non-compete” provision and was, therefore, not subject to the coverage of Wis. Stat. § 103.465 but, even if it was, the NSE was lawful under the statute which requires that any covenant not to compete be “reasonably necessary” to the protection of the employer’s interests.
The Supreme Court rejected Manitowoc’s first argument, holding that the NSE provision was, indeed, subject to the statute. It then made quick work of Manitowoc’s claim that the NSE, even if subject to the statute, was a reasonable effort to protect its interests. The Court explained that Manitowoc’s NSE provision was an unreasonably broad restraint on trade and was invalid “on its face.” The NSE prohibited Lanning from contacting any of Manitowoc’s 13,000 employees. That, the Court concluded, was an unreasonable restraint on Lanning’s – and Manitowoc employees’ – mobility in the workplace.
Restrictive covenants present significant limits on employee mobility in the marketplace. . If you are faced with such restraints, contact Hawks Quindel. One of our experienced employment attorneys may be able to help.
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