Employers beware, employees rejoice!
A recent Wisconsin Court of Appeals decision casts doubt on the enforceability of common employee non-solicitation agreements.
Employers routinely ask employees to sign non-competition agreements, limiting the employee’s ability to work for a competitor for a period of time.
Wisconsin courts have upheld such agreements, if reasonably necessary to protect an employer’s legitimate interests, and fairly limited in length and territory.
Non-compete agreements often also include non-solicitation agreements, which limit an employee’s post-termination ability to solicit other employees to leave the company and move to a competitor.
It had long been an open question whether such provisions were subject to the same scrutiny as non-compete agreements.
In The Manitowoc Company v. Lanning, 2015 AP 1530 (Aug. 17, 2016), the Court emphatically answered “yes.”
John Lanning, a long-time, respected employee of The Manitowoc Company, left to work for a competitor in 2010.
Manitowoc alleged Lanning actively helped his new employer woo three Manitowoc employees to jump ship to the new employer.
Manitowoc sued, claiming Lanning violated his non-solicitation clause, that he would “not, either directly or indirectly, solicit, induce or encourage any employee to terminate their employment” or “accept employment with any competitor, supplier or customer of Manitowoc.”
Manitowoc won big time in the trial court: $100,000 in damages and over $1 million in attorneys’ fees (all over three employees!).
The Court of Appeals, however, reversed, concluding that the non-solicitation agreement was unenforceable.
The Court first held that non-solicitation agreements are subject to Wisconsin Statute § 103.465, forbidding “unreasonable restraints” in non-compete agreements.
The Court then held that the Manitowoc agreement unreasonably “restricts an incredible breadth of competitive and noncompetitive activity.”
Most offensive to the Court were the restrictions’ prohibition of “any employee” from working for even a non-competitive employer, like a supplier or customer.
Given the massive attorneys’ fee award, Manitowoc has petitioned the Wisconsin Supreme Court to reverse the decision. That Court’s current make-up suggests a good chance exists that the Court may take the case and reverse the Court of Appeals, making broad non-solicitation agreements once again enforceable.
Or the parties may settle, leaving the Court of Appeals decision intact.
For now, any non-solicitation provision which prohibits more than the simple enticement of a limited set of highly valuable employees to move to a competitor, is presumptively unenforceable.
