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Non-Compete

Seneczko Wins Default as Discovery Sanction in Duty of Loyalty Claim

Seneczko Wins Default as Discovery Sanction in Duty of Loyalty Claim

By Alan E. Seneczko of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Non-Compete on Tuesday, October 15, 2019.

Wessels Sherman Attorney Alan Seneczko, managing shareholder of the Wisconsin office, recently won a huge decision in a claim against a former executive for breach of his duty of loyalty to the company (among other claims). The company, Storage Battery Systems, suspected its director of sales was using his position and the confidential information he acquired during his employment to funnel the company’s business opportunities to his own company, in competition with and in violation of his duty of loyalty to the company and his non-compete agreement. See, Storage Battery Systems, LLC v. Glenn Wilder and Professional Power Engineering, LLC, Case No. 17cv1244 (Wis. Cir. Ct., 01/17/19).

During the discovery process Seneczko requested electronic data, including data reflecting the defendants’ sales both during and after the termination of the employment relationship. In response, the defendants produced certain documents, but refused to produce any electronic data, which the court then compelled them to do. However, despite being ordered by the court to produce the data, the defendants produced a hard drive that had been wiped clean of data during the critical time period – allegedly the result of an attempt to remedy an unknown virus encountered while attempting to duplicate the hard drive. SBS also demonstrated, based on evidence it was able to recover, that the defendant had manipulated electronic data in order to conceal, delete and/or diminish evidence of revenue, sales and other transactions.

Seneczko moved the court to enter a default judgment in its favor as a sanction for the defendants’ willful discovery violations and disregard of the court’s orders – the most extreme sanction possible. After considering the parties’ arguments and conducting evidentiary hearings on the issue, the court granted the motion and entered judgment in favor of the plaintiff on all counts, finding that the defendants had egregiously, intentionally and flagrantly violated its orders by destroying and modifying electronic information in a conscious attempt to affect the outcome of the litigation. It ordered the defendants to reimburse the plaintiff $89,000 in costs and attorney fees, post a $400,000 surety bond to cover a potential recovery by SBS, and proceed to an evidentiary hearing on the amount of damages SBS had suffered as a result of the wrongful conduct.

Besides being a very nice victory for SBS, the court’s decision is important in two respects. First, it demonstrates that an executive’s duty of loyalty to the company he/she serves is very real, with serious consequences for any breach of that duty. Second, a party’s discovery obligations are also very real, with serious consequences for attempts to delete, obstruct or manipulate evidence that has been requested during the litigation process.

If you have questions about an employee’s duty of loyalty to your company, enforcement of a non-compete or no-solicitation agreement, feel free to contact Attorney Alan E. Seneczko at (262) 560-9696, or alseneczko@wesselssherman.com.

Tags: Destruction of Evidence, Discovery Sanctions, Duty of Loyalty, Enforcement of Non-Compete Agreement

Related Posts: Illinois Workplace Transparency Act, Illinois Employers Should Not Go Overboard With Non-Compete Agreements!, Twelve Commonly Asked Questions About Non-Compete Agreements In Illinois, Non-Compete Statute Applies To No-Raiding Provisions

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Arbitration Harassment Hiring/Firing Non-Compete

Illinois Workplace Transparency Act

Illinois Workplace Transparency Act

By Walter J. Liszka of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Harassment on Monday, August 26, 2019.

On June 2, 2019, the Illinois General Assembly approved the Workplace Transparency Act providing certain protections concerning sexual harassment in the workplace and imposing significant new obligations on Illinois Employers. This Bill was signed into law by Governor Pritzker in June 2019 and the provision of the new bill become effective January 1, 2020.

The Workplace Transparency Act prohibits Employers from entering into any Employment Agreement that includes non-disclosure or non-disparagement clauses dealing with claims for harassment or discrimination. The Workplace Transparency Act would permit such clauses dealing with claims of harassment or discrimination in Settlement and Separation Agreements so long as:

  1. The harassment or discrimination claims arose before the Agreement was signed; and
  2. The Clauses are mutually agreed upon and benefit to both parties; and
  3. The Employee/Applicant is given twenty-one (21) calendar days to review the Agreement before its execution; and
  4. The Employee/Applicant has seven (7) calendar days after signing the Agreement to revoke it.

The Workplace Transparency Act also prohibits the ability to enforce an Arbitration Agreement unless that Arbitration Agreement excludes discrimination and harassment claims, and Arbitration Agreements drafted by Employers may not shorten applicable statute of limitation periods for those claims or limit an Employee’s right to assert those claims under Federal and State Law-i.e., by prohibiting class actions. This prohibition of class actions seems to be inconsistent with recent United Supreme Court precedence (Lamps Plus incorporated v. Varela, Epic Systems Corporation v. Lewis and Kindred Nursing Senators LP v. Clark,) but obviously whether they are truly in conflict will have to wait for their court action.

One of the most troubling concepts of the Workplace Transparency Act is the requirement for Mandatory Annual Disclosures and required Sexual Harassment Training.

Starting July 1, 2020, the Workplace Transparency Act requires all private or public employers, labor organizations and parties to a public contract to report annually any settlement, adverse judgment or administrative ruling against them involving harassment or discrimination to the Illinois Department of Human Rights for the preceding calendar year. This information must be reported:

  1. The total number of adverse judgments or adverse rulings during the preceding year; and
  2. Whether any equitable relief was ordered against the Employer; and
  3. How many adverse judgments or administrative ruling in each of the following specific categories occurred in the previous year:
  • Sexual Harassment;
  • Discrimination or harassment on the basis of sex;
  • Discrimination or harassment on the basis of race, color or national origin;
  • Discrimination or harassment on the basis of religion;
  • Discrimination or harassment on the basis of age;
  • Discrimination or harassment on the basis of disability;
  • Discrimination or harassment on the basis of military status or unfavorable discharge;
  • Discrimination or harassment on the basis of sexual orientation or gender identity;
  • Discrimination or harassment on the basis of any other characteristic protected by the Illinois Human Rights Act.

As well, under the Act, every Employer with Employees working in the State of Illinois will be required annually to provide its Employees with a Sexual Harassment Prevention Training Program that it creates or, in the alternative, the Employer may use the sexual harassment prevention training model developed by the Illinois Department of Human Rights.

If an Employer fails to make the required disclosures dealing with adverse judgment or administrative ruling or fails to provide the sexual harassment training, an Employer may be subject to penalties for the failure to report or failure to train that. An Employer with fewer than four (4) Employees will be subject to an initial penalty of Five Hundred ($500.00) dollars for the first offense, a penalty not to exceed One Thousand ($1,000.00) dollars for the second offense and a penalty not to exceed Three Thousand ($3,000.00) dollars for the third or subsequent offense. If the Employer has four (4) or more employees, the first offense cost is One Thousand ($1,000.00) dollars the second offense cost is Three Thousand ($3,000.00) dollars and the third or subsequent offense cost is Five Thousand ($5,000.00) dollars.

For purposes of this Act, Employer is defined as “any person employing one or more employees in the State of Illinois”;

Settlement means “written commitment or agreement that an Employer owes to an Employee who has been a victim of sexual harassment as discrimination compensation or other consideration”; and

Adverse Judgment or Administrative Ruling means “final non-appealable ruling or decision in favor of Employee”.

Obviously, the obligations of an Employer under the Workplace Transparency Act have the potential of greatly increasing the “cost to do business” in the State of Illinois.

Questions? Contact attorney Walter Liszka in our Chicago office at (312) 629-9300 or by email at waliszka@wesselssherman.com.

Related Posts: Internal Harassment Complaints, Seventh Circuit Decision-Use Of The “N-Word”, Alert: Pending Legislation in Illinois Would Impose Huge Impact on Sexual Harassment Claims on all Employers, Alert: Pending Legislation in Illinois to Require Sexual Harassment Training of all Restaurant Employees

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Non-Compete

Illinois Employers Should Not Go Overboard With Non-Compete Agreements!

Illinois Employers Should Not Go Overboard With Non-Compete Agreements!

By Nancy E. Joerg of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Non-Compete on Monday, May 6, 2019.

In order to have non-compete agreements which have a chance of being found legally enforceable by an Illinois judge, Illinois employers must carefully figure out the scope of activities to be restricted by their proposed non-compete agreements. Employers relying on the protection of a non-compete agreement naturally want to protect the company’s legitimate business interests. The problem is that a one-size-fits-all broad restriction is more comprehensive than a narrow restriction but runs the extremely high risk it will be judged unreasonably broad and therefore legally unenforceable in Illinois.

Illinois employers often want to use broad restrictive non-compete clauses, especially with higher-level key employees, in an effort to carefully protect their business interests (customer base, sales strategies, special manufacturing processes, etc.). Nonetheless, it is important to remember that overly broad and very restrictive non-compete clauses are strongly disfavored by judges in many states, including Illinois. Such very broad restrictive non-compete agreements may well “backfire”, resulting in the complete invalidation of the entire non-compete agreement.

RECENT ILLINOIS FEDERAL COURT CASE: A recent decision by a federal court in Illinois, Medix Staffing Solutions, Inc. v. Dumrauf (N.D. Ill. Apr. 17, 2018), demonstrates an overbroad non-compete agreement “backfiring” with an Illinois judge. The federal judge harshly criticized the language in the non-compete agreement (used often in non-compete agreements throughout the United States), finding the particular language so broad and all-encompassing as to be legally unacceptable.

MEDIX’S NON-COMPETE WAS OVERLY BROAD: Judge Ellis of the Northern District of Illinois found Medix Staffing Solutions, Inc. (Medix hereinafter) was using a non-compete agreement excessively broad on its face. In its very broad non-compete agreement, Medix restricted Dumrauf, a former Medix employee, from taking ANY job with any other company that is in the same kind of business as Medix. The unfortunate non-compete language at issue prevented Dumrauf from working (within 50 miles of his former office) for ‘any business’ that ‘offers a product or services in actual competition with Medix’ or which may be engaged ‘in the Business of Medix.’

Judge Ellis found this non-compete language legally unacceptable because it failed to consider what services Dumrauf actually performed for Medix or whether he or his new company actually compete with Medix. Rather, the non-compete agreement barred Dumrauf from working for any company that merely functions in the same fields as Medix, regardless of whether that company is an actual Medix competitor.

JUDGE REFUSED TO MODIFY THE BROAD RESTRICTION: Judge Ellis noted that judges do have the legal power to modify overbroad restrictive covenants, but Judge Ellis pointedly refused to modify the Medix non-compete agreement under legal review. Judge Ellis (harshly) decided that Medix must instead “live with [its] decision” not “to draft an appropriate restrictive covenant.”

According to Judge Ellis, this Medix non-compete agreement was patently unreasonable because an employer cannot prevent a former employee from “working for a competitor in a noncompetitive capacity.” Therefore, Judge Ellis refused to “blue pencil” (i.e., modify) the Medix agreement, citing cases in Illinois stating that a court should refrain from modifying a covenant that is so broad as to be patently unfair as written. Judge Ellis decided that the Medix agreement was indeed one of these patently unfair non-compete agreements and therefore refused to narrow its scope.

MEDIX FAILED TO SHOW THE RESTRICTIVE COVENANT WAS NECESSARY: The Medix case thus again illustrates the legal principle that employers should draft restrictions narrowly, considering their most important business interests and go no further, particularly since Illinois judges rarely save overly broad restrictions by modifying them per blue-penciling clauses.

CONCLUSION: The Medix decision is a warning for Illinois employers, especially if they use very restrictive non-compete agreements with broad language similar to that struck down by the court in this case. Non-competition agreements should be narrowly and carefully tailored on an individualized basis with attention to the current state of the non-compete law in Illinois.

As illustrated by the Medix decision, the often seen broad non-compete language, barring employment with any other company in the same industry as the employer, in any capacity whatsoever, is almost always ruled invalid and legally unenforceable under Illinois non-competition law.

If any readers want to discuss any aspect of non-compete agreements or have a non-compete agreement drafted, please contact Attorney Nancy E. Joerg at Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.

Related Posts: Seneczko Wins Default as Discovery Sanction in Duty of Loyalty Claim, Illinois Workplace Transparency Act, Twelve Commonly Asked Questions About Non-Compete Agreements In Illinois, Non-Compete Statute Applies To No-Raiding Provisions

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Non-Compete

Twelve Commonly Asked Questions About Non-Compete Agreements In Illinois

Twelve Commonly Asked Questions About Non-Compete Agreements In Illinois

By Nancy E. Joerg of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Non-Compete on Tuesday, February 26, 2019.

Illinois is a state where non-compete agreements can be enforceable if done with certain guiding concepts and wording. The following are the most common questions asked by Illinois clients who are considering the use of non-compete agreements:

1. Why does a non-compete agreement have to be “supported by consideration” even though both parties sign the agreement. Isn’t freedom of contract enough?


Answer: No, it is not enough that each party (the employer and the employee) voluntarily sign the non-compete agreement. To be enforceable in Illinois, a non-compete agreement must be supported by some kind of valuable consideration such as money, a laptop computer, employment for a substantial period of time, etc.

2. Have Illinois courts determined how much money is adequate consideration?

Answer: No.

3. Why do some Illinois courts say that simply “being hired” may not be adequate legal consideration to support a non-compete agreement?


Answer: Because an at-will employee can be fired at any time, some Illinois courts find that simply being hired may not be adequate legal consideration to support a non-compete agreement.

4. Do some Illinois court cases conclude that two years or more of continued employment will suffice as adequate legal consideration to support a non-compete agreement?


Answer: Yes. While there is no bright line rule of two years being sufficient, two years seems to be the opinion of several courts in Illinois.

5. Can a non-solicitation provision be included in a non-compete agreement?


Answer: Yes, this is frequently done. Non-compete agreements often have non-solicitation provisions in them under which the employee (for a stated period of time after leaving the company) must not solicit customers, employees (or independent contractors) of the company to leave and go elsewhere. Sometimes non-solicitation clauses are drafted in lieu of non-competes because courts view them more favorably than non-competes. (Non-solicitation clauses must also be supported by consideration.)

6. Is it legal in Illinois to request only certain employees in the company sign a non-compete agreement and not ask others to do so?

Answer: Yes.

7. Is it permissible to have different dollar amounts of legal consideration offered to different employees in the company?


Answer: Yes, there does not have to be consistency in the amount of money offered to various employees as legal consideration for signing a non-compete agreement.

8. If there are modifications to the non-compete agreement, do the parties have to enter into a new non-compete agreement and does the employer then have to offer additional legal consideration to the employee signing the new agreement?


Answer: Yes, with rare exceptions.

9. Is it ok to put a non-compete provision into an employment agreement?


Answer: Yes, but not advised. If you do include the restriction in an employment agreement, it should not be “buried” in the employment agreement. The title of the employment agreement should be Employment Agreement Containing Non-Compete Provisions.

10. Is a non-compete agreement between an employer and a “low-wage employee” legal?


Answer: No, the Illinois Freedom to Work Act (which became effective January 1, 2017) prohibits non-compete agreements with any employee making $13.00 or less per hour.

11. Are non-compete agreements legal and enforceable in Illinois?

Answer: Yes, they are legal but they will only be enforceable in Illinois if the Judge believes the agreement is reasonable and warranted. You therefore don’t know ahead of time if the non-compete agreement will be judged enforceable. But, at the very least, a carefully drafted non-compete agreement will hopefully serve as a strong deterrent.

12. Do all states across the U.S. have the same law regarding the legality and enforceability of non-compete agreements?

Answer: No, this varies from state to state.

If any readers want to discuss any aspect of non-compete agreements or have a non-compete agreement drafted, please contact Attorney Nancy E. Joerg at Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.

Related Posts: Seneczko Wins Default as Discovery Sanction in Duty of Loyalty Claim, Illinois Workplace Transparency Act, Illinois Employers Should Not Go Overboard With Non-Compete Agreements!, Non-Compete Statute Applies To No-Raiding Provisions

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Non-Compete

Non-Compete Statute Applies To No-Raiding Provisions

Non-Compete Statute Applies To No-Raiding Provisions

By Alan E. Seneczko of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Non-Compete on Thursday, March 15, 2018.

The enforcement of non-compete agreements in Wisconsin is governed by the provisions of Wis. Stat. § 103.466, which sets forth five requirements that must be met in order for the restriction to be enforceable. Over the years, the courts have found that these restrictions applied not just to traditional non-compete agreements, but also to agreements not to solicit customers, non-disclosure/confidentiality agreements, and no-hire agreements between two employers. It therefore comes as no surprise that the Wisconsin Supreme Court recently held that the restrictions found in § 103.465 also apply to “no-raiding” covenants, which restrict former employees from soliciting or “poaching” employees of their former employer.

In Manitowoc Company v. Lanning, 2018 WI 6 (January. 19, 2018), the Wisconsin Supreme Court held that such “no raiding” or “no poaching” restrictions constitute restraints of trade of the nature that Section 103.465 was intended to address. Therefore, in order to be enforceable, they must satisfy all the requirements of the statute. The court then held that the specific “no-raiding” provision at issue in the case before it was not enforceable because it was overly broad, barring the solicitation of “any employee,” which could be read to include every one of the company’s 13,000 employees world-wide, regardless of their position, relationship with the departing employee or geographic location.

As always, when drafting non-compete agreements and similar restrictive covenants, employers must take care to ensure that they are narrowly drafted and focus entirely on the competitive threat posed by the particular employee and the position that he/she occupies.

If you have any questions feel free to contact Attorney Alan E. Seneczko at (262) 560-9696, or alseneczko@wesselssherman.com.

Related Posts: Seneczko Wins Default as Discovery Sanction in Duty of Loyalty Claim, Illinois Workplace Transparency Act, Illinois Employers Should Not Go Overboard With Non-Compete Agreements!, Twelve Commonly Asked Questions About Non-Compete Agreements In Illinois

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Non-Compete

Illinois Employers Should Use Caution with Having Low-Income Employees Sign Covenants-Not-To-Compete

Illinois Employers Should Use Caution with Having Low-Income Employees Sign Covenants-Not-To-Compete

By Joseph H. Laverty of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Non-Compete on Tuesday, November 28, 2017.

The unemployment rate in Illinois continues to decline, as is the case nationally. As of the time of writing this article, the state wide unemployment rate in Illinois is 4.6% and numerous experts predict that this rate will go lower as the economy continues to improve. Some cities in Illinois have unemployment rates as low as 3.4%. What this means for employers is that it may become even more difficult to fill open positions.

Many employers are reviewing their wage and benefit packages to try to retain employees. Employers are also using restrictive covenants more and more in trying to keep employees from going to other employers for higher wages and better benefits. Illinois employers need to be aware of the Illinois Freedom to Work Act (“Act”). The Act became law on January 1, 2017. The Act prohibits employers from entering into a covenant not to compete with any low-wage employee. Under the Act, a low wage employee means any employee who earns the greater of: 1) an hourly rate equal to the minimum wage required by the applicable federal, state or local minimum wage; or 2) $13.00 per hour. The Act states that a covenant not to compete entered into between an employer and a low-wage employee (an employee earning $13.00 per hour or less) is illegal and void.

Recently, the Illinois Attorney General’s office filed suit against a national chain of payday lending stores – Check Into Cash – which has thirty-three (33) locations in Illinois. The lawsuit alleges that Check Into Cash required its low-wage employees to sign non-compete agreements in violation of the Act. Last year, before the Act went into effect, the state of Illinois settled a similar lawsuit with Illinois based fast food purveyor, Jimmy Johns, which had employees sign covenants not to compete as well.

As the employment market becomes more and more competitive, employers need to take note and understand the Illinois Freedom to Work Act and determine if they are in compliance with the Act. Illinois employers need to determine if there is a real “business necessity” for entering into the covenant not to compete, such as protecting trade secrets, or if the covenant is overly restrictive and simply trying to prevent employees from leaving in an increasingly tight job market, especially for low paying jobs. Employers should seek assistance when implementing restrictive covenants to make sure the covenants are enforceable, not over reaching and in compliance with the law.

Wessels Sherman attorneys can help companies with drafting covenants not to compete, as well as other restrictive covenants (and can advise companies that already have restrictive covenants in place on whether they are enforceable and comply with the law).

If you have any questions and/or would like additional information regarding the Illinois Freedom to Work Act, please contact Attorney Joseph H. Laverty at (563) 333-9102 or via email at jolaverty@wesselssherman.com.

Related Posts: Seneczko Wins Default as Discovery Sanction in Duty of Loyalty Claim, Illinois Workplace Transparency Act, Illinois Employers Should Not Go Overboard With Non-Compete Agreements!, Twelve Commonly Asked Questions About Non-Compete Agreements In Illinois

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Non-Compete

Legislative Update: Some Non-Compete Agreements Unenforceable Under New Illinois Law

Legislative Update: Some Non-Compete Agreements Unenforceable Under New Illinois Law

By Anthony J. Caruso Jr. of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Non-Compete on Monday, November 14, 2016.

New Law Affects Non-Compete Agreements for Employees earning less than $13 per hour

Today, many employers use non-compete agreements to protect their company’s business. As such, the issue is always whether or not a non-compete agreement is enforceable for the Company. Now, in Illinois, there is a clear directive as to certain employees that the non-compete agreement is NOT enforceable by Illinois law. On August 19, 2016, Illinois Governor Bruce Rauner signed into law the Illinois Freedom to Work Act, effective January 1, 2017.

What is a covenant not to compete under this law?

An Agreement between an employer and a low wage employee that restricts such low wage employee from performing:

· Any work for another employer for a specified period of time

· Any work in a specified geographical area, or

· Work for another employer that is similar to such low-wage employee’s work for the employer as a party to the agreement.

What is the effect of the law?

Such agreements entered into after the effective date of this law, January 1, 2017, ARE ILLEGAL AND VOID.

What EMPLOYERS are covered under this law?

“Employer” includes any individual, partnership, association, corporation, limited liability company, business trust, or any person or group of persons acting directly or indirectly in the interest of an employer in relation to an employee, for which one or more persons are gainfully employed on some day within a calendar year. “Employer” does NOT include governmental or quasi-governmental bodies.

What low-wage EMPLOYEES are covered under this law?

An employee who earns less than $13 an hour.

Note: This law does NOT bar all non-compete agreements in Illinois, but rather, it restricts the use of such agreements with certain employees.

Employers may want to review their use of non-compete agreements with regard to their business.

Questions? Contact Attorney Anthony Caruso at Wessels Sherman St. Charles office at (630) 377-1554 or by email at ancaruso@wesselssherman.com.

Related Posts: Seneczko Wins Default as Discovery Sanction in Duty of Loyalty Claim, Illinois Workplace Transparency Act, Illinois Employers Should Not Go Overboard With Non-Compete Agreements!, Twelve Commonly Asked Questions About Non-Compete Agreements In Illinois

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Non-Compete

Provisions of Non-Compete Law Apply to No-Solicitation of Employees Restraints

Provisions of Non-Compete Law Apply to No-Solicitation of Employees Restraints

By Alan E. Seneczko of Wessels Sherman Joerg Liszka Laverty Seneczko P.C. posted in Non-Compete on Tuesday, September 27, 2016.

It is common, if not standard, for most non-compete agreements to contain a clause that prohibits the covered employee from soliciting current employees to terminate their employment in order to accept employment with a competitor. In essence, it prohibits the departing employee from raiding his/her former employer’s valued employees. Until recently, the courts have never determined whether such constraints are subject to the requirements of Wis. Stat. § 103.465, which governs the enforceability of non-compete agreements. It now has, and they are.

In The Manitowoc Company v. John Lanning, 2015AP1530, decided on August 17, 2016, the Wisconsin Court of Appeals found that a non-solicitation of employees (NSE) clause is a restrictive covenant subject to and enforceable under Section 103.465. The disputed clause, contained in a confidentiality agreement signed by an executive, prohibited him from soliciting, inducing or encouraging any employees to terminate their employment with the company or to accept employment with a competitor, supplier or customer. Manitowoc claimed that after leaving the company to work for a direct competitor, the executive worked with his new employer to woo several key Manitowoc employees to leave their employment and come work for it. Manitowoc contended that the NSE was not subject to the requirements of Section 103.465, but if it was, it was reasonable and enforceable. The court disagreed.

Section 103.465 provides that non-compete agreements are lawful and enforceable “only if the restrictions imposed are reasonably necessary for the protection of the employer.” Otherwise, they constitute an illegal restraint of trade. In order to be enforceable, the restrictive covenant must be necessary for the protection of the employer; provide reasonable time and territorial limits; not be harsh or oppressive to the employee; and, not be contrary to public policy.

The court found that the NSE was a restraint of trade subject to Section 103.465 because it limited competition in the market for employees, which included recruiting employees from competitors. It then found that the prohibition violated Section 103.465 because it was overbroad, and therefore unenforceable. The NSE restricted the solicitation of “any employee,” which encompassed both high-level executives and entry level laborers, in any department throughout the company. It also covered a wide swath of potential employers – “competitors, customers, and suppliers,” many with no competitive connection to the company – such as Starbucks, which was a customer. Given the sweeping scope of the restriction, the company could not prove why it was necessary to restrict the solicitation of employees from working for businesses that did not compete, or in positions that posed no competitive risk.

Drafting an enforceable non-compete agreement is a very tricky business, and the Manitowoc Company decision is just another example why. Non-compete agreements and their various components (confidentiality, competitive employment, no-solicitation) must be narrowly drafted to protect a legitimate business interest. If you have any questions about the court’s decision or a non-compete agreement, contact WS Attorney Alan E. Seneczko at (262) 560-9696, or alseneczko@wesselssherman.com.

Related Posts: Seneczko Wins Default as Discovery Sanction in Duty of Loyalty Claim, Illinois Workplace Transparency Act, Illinois Employers Should Not Go Overboard With Non-Compete Agreements!, Twelve Commonly Asked Questions About Non-Compete Agreements In Illinois

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