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A Wisconsin equipment manufacturer’s nonsolicitation agreement that applied to all 13,000 company employees worldwide was overly broad and unenforceable, says the Wisconsin Supreme Court in a divided opinion.
John Lanning, who worked for The Manitowoc Co. Inc., a Manitowoc, Wisconsin-based food service equipment and construction crane manufacturer, for more than 25 years, left the firm in 2010 and joined a competitor, Peachtree City, Georgia-based SANY America Inc., according to Friday’s ruling by the Wisconsin Supreme Court in The Manitowoc Co. Inc. v. John M. Lanning.
Mr. Lanning had signed a nonsolicitation agreement in 2008. Manitowoc filed suit against him, charging he had violated the agreement by communicating with at least nine of its employees about potential employment opportunities at SANY.
A Manitowoc trial court ruled in the company’s favor, awarding it $98,000 in damages, $1 million in attorneys fees and $37,000 in court costs against Mr. Lanning. A Waukesha, Wisconsin, state appeals court overturned the ruling. The appeals court ruling was affirmed by the state supreme court in Madison, Wisconsin, in a 4-2 ruling.
The issues in the case are whether the noncompete agreement is covered by Wisconsin’s trade restraint statue, and if so, whether the agreement is unenforceable, says the ruling.
The agreement is a restraint of trade governed by the state statute, said the opinion. It restricts Mr. 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,” it said.
“In addition, the limitation on Lanning also affects access to the labor pool by a competitor of Manitowoc Company (including Lanning’s current employer, SANY America).”
The ruling also held the agreement was unenforceable. “It does not meet the statutory requirement that the restrictions be ‘reasonably necessary for the protection of the employer,’” said the ruling, in quoting the statute.
The ruling says the words “any employee” in the nonsolicitation agreement contains no limitations based upon the nature of the employee’s position with the company, Mr. Lannon’s personal familiarity with, or influence over, a particular employer, nor upon the geographical location in which the employee works.
Manitowoc “has a protectable interest in maintaining its entire workforce flouts the generally recognized principle that the law ‘does not protect against the raiding of a competitor’s employees,” said the ruling, in quoting an earlier case.
“Ordinarily an employer’s protectable interest is limited to retaining top-level employees, employees who have special skills or special knowledge important to the employer’s business, or employees who have skills that are difficult to replace.”
The dissenting opinion in the case states the ruling changes the statute from one “that balanced the rights of employees and their employees into a broad mandate that prevents employers from protecting their businesses form third-party raiding.”
“In so doing, it permits John M. Lanning to assist SANY America, Inc., in cherry picking Manitowoc Company, Inc.’s key employees and thereby reduces the competition that Manitowoc would otherwise be able to exert against SANY, as both compete in the same market.”
In December, fast-food franchise Jimmy John's Enterprises L.L.C. agreed not to enforce a prohibition on workers at its sandwich shops from taking jobs with competitors in order to settle a lawsuit claiming the agreements were illegal, according to the Illinois attorney general.
STAMFORD, Conn.A nonsolicitation agreement signed by a former Hilb Rogal & Hobbs Co. producer who resigned to join a rival brokerage firm is enforceable, even if the agreement erroneously excluded language expressly prohibiting certain actions, the Connecticut Appeals Court has ruled.