Wisconsin Court Of Appeals Strikes Down Enforceability Of Non-Solicitation Agreement

Douglas J. Carroll, Jr. Employee Rights, Employee Rights News, Employment Contracts, Milwaukee Employment Lawyer, Non-Compete Agreements

In a recent decision,  Manitowoc Company v. Lanning,  the Wisconsin Court of Appels struck down a Non-Solicitation agreement as an unenforceable restrictive covenant under §103.465, Wis. Stats, Wisconsin’s Restrictive Covenants/Non-Compete statute.

In Wisconsin, despite what appears to be a case law trend to the contrary, Non-Compete Agreements are disfavored under the law and subject to close scrutiny by the Courts. Indeed, Courts are required to construe contractual language in favor of the employee.

In Lanning, the employee signed a contract in which he agreed not to directly or indirectly solicit, induce or encourage any employee of Manitowoc Company to terminate their employment with the company or to accept employment with a competitor, supplier or customer of the company.  The fact that the employee violated this contractual provision was not disputed in the lawsuit.  The issues were whether Wisconsin’s Non-Compete statute applied to this contractual provision and, if so, was it unenforceable thereunder.

Wisconsin’s Non-Compete statute provides:

A covenant by an assistant, servant or agent not to compete with his or her employer or principal during the term of the employment or agency, or after the termination of that employment or agency, within a specified territory and during a specified time is lawful and enforceable only if the restrictions imposed are reasonably necessary for the protection of the employer or principal. Any covenant, described in this section, imposing an unreasonable restraint is illegal, void and unenforceable even as to any part of the covenant or performance that would be a reasonable restraint.

Manitowoc argued that the Non-solicitation agreement was not covered under the law.  The Court held:

“Manitowoc’s argument is difficult to understand. In defending its substantive reasonableness, Manitowoc vigorously maintains that the NSE provision only protects Manitowoc against unfair competition by Lanning and does not apply more broadly. So concerned was it about Lanning’s purported violations of the agreement that it spent over $1 million in attorneys’ fees and costs to keep Lanning and his new employer—a direct competitor of Manitowoc—from “systematically poaching” its employees. In the next breath, Manitowoc argues that the NSE provision is not about competition at all, and therefore not subject to WIS. STAT. § 103.465. Even accepting the legitimacy of legal arguments in the alternative, Manitowoc cannot have it both ways.”

Next, Manitowoc argued that if Wisconsin’s Non-Compete statute applied, the Non-Solicitation agreement was enforceable thereunder because the in this case, the employee actually solicited its employees to leave on behalf of a direct competitor.  The Court disagreed, explaining that in determining whether a restrictive covenant is over broad and unenforceable, Wisconsin Courts are to look at the plain language of the agreement itself, not the particular facts and circumstances of the case. The Court held that because the Non-Solicitation agreement was overbroad an unenforceable because its plain language prohibited activities that were not connected to protecting Manitowoc’s legitimate interests such as soliciting a part-time janitor to leave the company, encouraging a friend employed by the company to retire or even acting as a job reference for a former co-worker.

This decision is good news for Wisconsin employees and Milwaukee employment attorneys as it seems to have stemmed the tide on recent decisions expanding employer’s ability to enforce Wisconsin Non-Compete Agreements.

If you signed a Non-Compete agreement and are considering leaving our job or have recently been discharged, contact a Milwaukee Employment Lawyer for a review of the enforceability of your Non-Compete Agreement.

Carroll Law Firm, SC is a Milwaukee area Employment Law Firm dedicated to fighting for the rights of employees throughout the State of Wisconsin.