Careful Drafting Required: Restrictions On Employee Solicitation Subject To Wisconsin Non-Compete Law

Many employers want to prevent their trusted employees from leaving the company and poaching their employees. In Manitowoc Company, Inc. v. Lanning, No. 2015AP1530 (January 19, 2018), the Supreme Court of Wisconsin examined a non-solicitation provision prohibiting Manitowoc Company's former employee, Lanning, from "directly or indirectly soliciting, inducing, or encouraging any employee of Manitowoc Company to terminate his or her employment with Manitowoc Company or to accept employment with a competitor, supplier, or customer of Manitowoc Company." Lanning, a "successful, knowledgeable, and well-connected" 25-year employee of Manitowoc, left the company to go work for a competitor. He then contacted at least nine Manitowoc employees about potential employment opportunities with his new employer, took one Manitowoc employee out to lunch, took one Manitowoc employee on a tour of the competitor's plant in China, and participated in another Manitowoc employee's job interview with the competitor. Manitowoc then brought suit based on Lanning's violation of the non-solicitation provision of his employment agreement.

In a case of first impression, the Supreme Court of Wisconsin upheld the court of appeals's finding that Wisconsin Statutes Section 103.465, which explicitly refers to a "covenant not to compete" applies to agreements prohibiting solicitation of employees. The Court found not applying Section 103.465 to non-solicitation provisions would be contrary to the law and stated the law consistently has required looking at "the effect of the restraint rather than its label." The court held that the non-solicitation provision at issue restricted "Lanning's ability to engage in the ordinary competition attendant to a free market, specifically restricting Lanning's freely competing for the best talent in the labor pool. In addition, the limitation on Lanning also affects access to the labor pool by a competitor," including Lanning's new employer.

The court then went on to analyze the provision under Section 103.465. Wisconsin courts have consistently interpreted Section 103.465 as requiring restrictive covenants:

(1) be necessary for the protection of the employer, that is, the employer must have a protectable interest justifying the restriction imposed on the activity of the employee;

(2) provide a reasonable time limit;

(3)...