non disclosure agreement

An “anti-poaching” provision is a common feature of many employment contracts for higher-level employees these days. While the wording can vary a bit, the provision usually provides that if the employee is terminated or otherwise leaves the employment, he or she cannot solicit former co-workers to quit or accept employment with a competitor, supplier, or customer. While not barring anti-poaching provisions altogether, the Wisconsin Court of Appeals, in Manitowoc Co. v. Lanning, 2016 Wisc. App. LEXIS 537 (Aug. 17, 2016), recently cast doubt on their enforcement.

Former Employer Had Been Awarded More than $1 Million in Attorney’s Fees and Costs

Lanning, the former employee, was what the Wisconsin called a “big fish.” An engineer with more than 25 years experience, many at Manitowoc held him in high regard. He signed an agreement with Manitowoc that contained a nonsolicitation of employees (NSE) provision. For two years following his employment with Manitowoc, he agreed not to solicit, induce, or encourage any other employee from accepting employment with a competitor, supplier, or customer. Manitowoc said Lanning breached the NSE provisions and sued. Eventually the trial awarded Manitowoc $97,844.78 in damages, $1 million in attorneys’ fees, and $37,246.82 in costs.

NSE Provision Was Not Enforceable

The Wisconsin appellate court reversed. Finding first that the NSE provision was subject to the provisions of Wis. Stat. § 103.465 since it sought to “restrain competition,” the court added that while Manitowoc articulated legitimate, even protectable, concerns, the provision it drafted was “far too sweeping” to withstand the close scrutiny the court gave such restrictive covenants. The court observed, for example, that NSE provision barred Lanning’s solicitation of “any employee” of the company, including employees in a division separate from the one in which Lanning worked. The court offered an interesting hypothetical, indicating that since Starbucks was a Manitowoc customer, the NSE provision would be violated if Lanning encouraged a young former colleague to leave Manitowoc and work part time as a barista at Starbucks to pursue graduate studies. The court added that the NSE provision focused too much on Lanning’s actions, and not enough on Manitowoc’s reasonable needs.

With Careful Drafting, Nonsolicitation Provisions Can Still Stand

In its decision, the court said that Manitowoc’s stated interest – protecting itself from Lanning’s specialized knowledge of its talent base and his relationships with employees – did not justify the broad ban on the solicitation, inducement, or encouragement of any employee. The court left some room for valid restrictions. One thing seems absolutely clear: The kind of “cookie-cutter” restrictions found in many employment agreements will not withstand court scrutiny. Careful, specific drafting of non-compete agreements is required.

Milwaukee Business, Employment, and Commercial Litigation Attorneys

Does your business routinely require some or all of its employees to sign noncompete agreements? Do your agreements contain NSE clauses or provisions? Does your business have trade secrets that need protection? Has your business expended considerable sums in training and equipping employees in such a manner that their becoming associated with other competitions would harm it? If so, you should contact the Milwaukee business litigation firm of Kerkman Wagner & Dunn We have over 50 years of combined legal experience representing business owners in Wisconsin. Our firm has big firm talent and provides small firm attention. Call us at 414-278-7000 or complete our online contact form.

« »