Veteran
business law attorney, Richard A. Kranitz, Esq., comments on Manitowoc Company v. Lanning, a recent
decision from the Supreme Court of Wisconsin, addressing the enforceability of non-solicitation
of employees provision in an employment agreement
In his
newest published article, business lawyer and coach Richard Kranitz reviews the
Wisconsin Supreme Court case of Manitowoc Company v. Lanning, which has
important implications for employment agreements. The full article is available
on the blog of Mr. Kranitz at https://richardkranitzblog.blogspot.com/
The
defendant John Lanning worked for the Manitowoc Company (hereinafter
“Manitowoc”) for 25 years as a chief engineer of its construction crane
division, starting in 1985. In 2008,
Lanning signed an employment agreement with Manitowoc that contained a non-solicitation
of employees provision. The
non-solicitation provision prohibits Lanning from “soliciting, inducing, or
encouraging any Manitowoc Company employee to terminate his or her employment
with Manitowoc Company or to accept employment with a competitor, supplier, or
customer of Manitowoc Company” for a period of two years after Lanning’s
termination.
Lanning
quit his job at Manitowoc on January 6, 2010 and became the director of
engineering at SANY America, a competitor of Manitowoc. Manitowoc claimed that Lanning subsequently
violated the non-solicitation provision on numerous occasions. “For example, Manitowoc Company asserts that
Lanning communicated with at least nine Manitowoc Company employees about
potential employment opportunities at SANY, took one Manitowoc Company employee
out to lunch in connection with SANY recruitment efforts, took another
Manitowoc Company employee on a tour of a SANY crane manufacturing plant in
China, and participated in a third Manitowoc Company employee's job interview
with SANY.”
First,
the Wisconsin Supreme Court addressed whether Wisconsin Statute § 103.465,
pertaining to restrictive covenants in employment contracts, applies to the
non-solicitation provision in Lanning’s employment contract. The statute provides that “’any covenant’
described in § 103.465 imposing an ‘unreasonable restraint is illegal’ even as
to any part of the covenant that would be a reasonable restraint”. Manitowoc argued that section 103.465 does
not apply to the non-solicitation provision because it is not a non-compete
provision, rather non-solicitation. The
Court, however, noted that “[t]ime and again, the case law has focused on the
effect of the provision of an employment agreement rather than its label to
determine whether it constitutes a restraint of trade governed by Wis. Stat. §
103.465”. Further, “[w]hether a particular
agreement constitutes a restraint of trade is based not upon how the agreement
is labeled but upon the effect of the agreement on employees and competition”. Therefore, because ”[t]he effect of Lanning's
non-solicitation provision is to prevent Lanning and a Manitowoc Company
competitor from competing fully with Manitowoc Company in the labor pool by
soliciting Manitowoc Company employees”, the provision did fall under the scope
of section 103.465.
The Court
then addressed whether the non-solicitation provision met the requirements of
the statute. The Court noted that the
provision prohibits Lanning from soliciting any employee of Manitowoc, which
numbers over 13,000 worldwide. “The
non-solicitation provision contains no limitations based upon the nature of the
employee's position within Manitowoc Company. No limitations are based upon
Lanning's personal familiarity with or influence over a particular employee.
There is no limit based upon the geographical location in which the employee
works.” The Court noted that while an
employer may have a protectable interest in “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”,
it does not have a protectable interest in retaining all employees. Therefore, the Court upheld the lower
appellate decision striking down the non-solicitation provision as
unenforceable.
Mr.
Kranitz notes that the case serves as a cautionary tale for practitioners
drafting restrictive provisions in employment contracts as well as employers
who wish to utilize such provisions. The
case is Manitowoc Company v. Lanning,
Case No. 2015AP1530.
About Richard A. Kranitz
Richard Kranitz is an experienced attorney and
business consultant in the areas of corporate, securities and tax planning for
corporations, partnerships, joint ventures, limited liability companies,
multi-unit enterprises, and a variety of different non-profit entities. In
addition, he has counseled their owners and executives in compensation
planning, estate plans, and asset protection.
References
Website: https://advicoach.com/rkranitz/
LinkedIn Profile:
https://www.linkedin.com/in/richard-kranitz-63684b
Attorney Profile:
https://solomonlawguild.com/richard-a-kranitz-esq
News at:
https://hype.news/attorney-richard-a-kranitz/n-16281b97-6a6a-4de2-be3e-796f2da08677/stories
*** Richard Kranitz (Wisconsin) is an experienced attorney and business consultant in the areas of corporate, securities and tax planning for corporations, partnerships, joint ventures, limited liability companies, multi-unit enterprises, and a variety of different non-profit entities. In addition, he has counseled their owners and executives in compensation planning, estate plans, and asset protection. Attorney profile at: https://solomonlawguild.com/richard-a-kranitz-esq
