It’s time to take a look at your non-competes.
The Wisconsin Supreme Court ruled for the first time in the state’s history that a company’s employee non-solicit provision in a restrictive covenant agreement was subject to Wisconsin’s restrictive covenant statute. In Manitowoc Company, Inc. v. Lanning, the Court held that when an employee non-solicitation provision acts as a restraint of trade, it is subject to the same strict enforceability requirements as typical non-competition provisions.
A review of the facts can be found in our earlier blog post regarding the Wisconsin Court of Appeal’s decision.
The employer, Manitowoc Company, used an employee non-solicit in its agreement that can be found in many employers’ restrictive covenant agreements in Wisconsin. In the agreement, the employee, John Lanning, agreed he would not:
[F]or a period of two years . . . (either directly or indirectly) solicit, induce or encourage any employee(s) to terminate their employment with Manitowoc or to accept employment with any competitor, supplier or customer of Manitowoc. . . .
The Court found the employee non-solicit to be a restraint on trade covered by the statute because it limited other employees’ mobility by its broad sweeping terms. Despite the fact that Manitowoc sought to enforce the restriction in a narrower manner than what was written in the agreement, the Court found the restriction overbroad on its face and unenforceable.
The Court stated in no uncertain terms that the provision created “a sweeping prohibition that prevents Lanning from encouraging any Manitowoc Company employee, no matter the employee’s job or location, to terminate his or her employment with Manitowoc Company for any reason, or soliciting any Manitowoc Company employee to take any position with any competitor, supplier, or customer of Manitowoc Company.” 2018 WI 6, ¶ 56.
As a result of this decision, employee non-solicitation provisions will be subject to much greater scrutiny under Wisconsin law. Employers should review their existing covenants with legal counsel to determine if updates are necessary.