The Manitowoc Company, Inc. v. John M. Lanning ( 2018 )

2018 WI 6SUPREME COURT OF WISCONSIN
CASE NO.: 2015AP1530
COMPLETE TITLE: The Manitowoc Company, Inc.,
Plaintiff-Respondent-Petitioner,
v.
John M. Lanning,
Defendant-Appellant.
REVIEW OF A DECISION OF THE COURT OF APPEALS
Reported at 371 Wis. 2d 696, 885 N.W.2d 798PDC No: 2016 WI App 72 - Published
OPINION FILED: January 19, 2018
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: September 5, 2017
SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Manitowoc
JUDGE: Gary L. Bendix
JUSTICES:
CONCURRED: R.G. BRADLEY, J. concurs, joined by GABLEMAN, J.
and KELLY, J. (opinion filed).
DISSENTED: ROGGENSACK, C.J. dissents, joined by ZIEGLER, J.
(opinion filed).
NOT PARTICIPATING:
ATTORNEYS:
For the plaintiff-respondent-petitioner, there were briefs
filed by Suzanne M. Glisch, Joel S. Aziere, and Buelow Vetter
Buikema Olson & Vilet, LLC, Waukesha. There was an oral
argument by Joel S. Aziere.
For the defendant-appellant, there was a brief filed by
Oyvind Wistrom and Lindner & Marsack, S.C., Milwaukee. There
was an oral argument by Oyvind Wistrom.
2018 WI 6NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2015AP1530
(L.C. No. 2011CV216)
STATE OF WISCONSIN : IN SUPREME COURT
The Manitowoc Company, Inc.,
Plaintiff-Respondent-Petitioner,
FILED
v.
JAN 19, 2018
John M. Lanning,
Diane M. Fremgen
Acting Clerk of Supreme
Defendant-Appellant. Court
REVIEW of a decision of the Court of Appeals. Affirmed.
¶1 SHIRLEY S. ABRAHAMSON, J. This is a review of a
published decision of the court of appeals reversing a judgment
of the Circuit Court, Manitowoc County, Gary L. Bendix, Judge.1
The circuit court granted the motion of The Manitowoc Company,
Inc., the plaintiff, for summary judgment and denied the cross-
motion for summary judgment of the defendant, John M. Lanning.
After a bench trial on damages, the circuit court awarded
1
Manitowoc Co., Inc. v. Lanning, 2016 WI App 72, 371
Wis. 2d 696, 885 N.W.2d 798.
No. 2015AP1530
Manitowoc Company $97,844.78 in damages, $1,000,000 in attorney
fees, and $37,246.82 in costs against Lanning.
¶2 The court of appeals reversed the circuit court
judgment in favor of Manitowoc Company. It concluded that
Lanning's non-solicitation of employees provision (sometimes
referred to herein as an NSE provision) imposed by Manitowoc
Company as part of Lanning's employment agreement is governed by
Wis. Stat. § 103.465 (2013-14) and that it is unenforceable
under the statute.2
¶3 The non-solicitation of employees provision prohibits
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.
The scope of the non-solicitation of employees provision
includes all of Manitowoc Company's 13,000 world-wide employees
regardless of an employee's position within Manitowoc Company or
the employee's connection to Lanning.
¶4 Two issues of law are presented on the cross-motions
for summary judgment:3
1. Does Wis. Stat. § 103.465, which explicitly refers to a
"covenant not to compete," apply to the non-solicitation
2
All subsequent references to the Wisconsin Statutes are to
the 2013-14 version unless otherwise indicated.
3
For a discussion of cross-motions for summary judgment,
see Ziegler Co., Inc. v. Rexnord, Inc., 139 Wis. 2d 593, 595
n.1, 407 N.W.2d 873 (1987).
2
No. 2015AP1530
of employees provision prohibiting Lanning from
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?
2. If Wis. Stat. § 103.465 governs Lanning's non-
solicitation of employees provision, is the provision
enforceable under § 103.465?4
4
Manitowoc Company set forth five issues in its petition
for review as follows:
1. Whether Wis. Stat. § 103.465, which refers to a
"covenant by an assistant, servant or agent not to
compete with his or her employer or principal during
the term of the employment or agency, or after the
termination of that employment or agency," governs
non-solicitation of employees ("NSE") clauses, which
do not prohibit any individual from competing with
his/her former employer.
2. Assuming, arguendo, Wis. Stat. § 103.465 governs
NSE clauses, whether an NSE clause, which does not
prohibit competition with the former employer, should
be evaluated under the same legal standard(s) as a
non-compete clause, and whether the Court of Appeals
erred in equating a 2-year restriction on the
solicitation of employees, which permitted any
individual to leave the employer and work for a
competitor (as Lanning did in this case), to a 3-year
restriction from working for a competitor in any
capacity.
3. Assuming, arguendo, Wis. Stat. § 103.465 governs
NSE clauses, whether Lanning's NSE provision, which
permitted him to work for Manitowoc's largest Chinese
competitor, unreasonably restrains trade.
4. Assuming, arguendo, Wis. Stat. § 103.465 governs
NSE clauses, whether Lanning's NSE provision, which
(continued)
3
No. 2015AP1530
¶5 In response to the first issue, the particular terms
of the non-solicitation of employees provision at issue in the
instant case do not appear to have been analyzed by any prior
Wisconsin court decision.5 We conclude, as prior cases have
concluded, that although Wis. Stat. § 103.465 explicitly refers
to a covenant not to compete, the plain meaning of § 103.465 is
merely prevented Lanning from raiding Manitowoc
employees, is "reasonably necessary" to protect
Manitowoc's legitimate business interests.
5. Assuming, arguendo, Wis. Stat. § 103.465 governs
NSE clauses, whether the constitutional right to
contract may be infringed upon through the use of
aggrandized hypothetical scenarios rather than the
undisputed facts of a case to invalidate an NSE clause
in a contract between an employer and employee.
The two issues we address are dispositive and in effect
address the issues Manitowoc Company set forth.
5
In Equity Enterprises, Inc. v. Milosch, 2001 WI App 186,
247 Wis. 2d 172, 633 N.W.2d 662, the court of appeals analyzed
an employment agreement containing restrictive covenants. In
one of those covenants, the employee agreed that he would not,
after the termination of his employment, entice any sales
representative of the employer to terminate his or her
employment with the employer. However, the parties in Milosch
did not raise or dispute whether Wis. Stat. § 103.465 applied to
the employee's non-solicitation provision. The court of
appeals' decision did not discuss or rule on the validity of the
employee's non-solicitation provision. Instead, it invalidated
another restrictive covenant because it was overbroad. That
provision of the agreement barred the employee from doing
business with customers of the employer after termination of
employment. Thus, the court of appeals invalidated the entire
agreement.
Lanning's contention that Milosch determined that a non-
solicitation of employee provision was governed by § 103.465 is
not persuasive.
4
No. 2015AP1530
not limited to a covenant in which an employee agrees not to
compete with a former employer.6 This court has explicitly
stated that "it would be an exercise in semantics to overlook
§ 103.465 merely because [a provision] of the agreement is not
labeled a 'covenant not to compete.'"7 Rather, § 103.465 has
been applied to agreements viewed as restraints of trade.
¶6 Indeed, this court has acknowledged that "the explicit
purpose of Wis. Stat. § 103.465, as plainly stated in the
statute, is to invalidate covenants that impose unreasonable
restraints on employees" and that § 103.465 "essentially deals
with restraint of trade . . . regardless of whether a
restriction is labeled a 'non-disclosure' provision or a
'covenant not to compete.'"8
¶7 The court has repeatedly recognized that a restraint
of trade may take many forms. The court has interpreted Wis.
Stat. § 103.465 as applying not only to traditional covenants in
6
See, e.g., Lakeside Oil Co. v. Slutsky, 8 Wis. 2d 157, 98
N.W.2d 415 (1959).
7
Tatge v. Chambers & Owen, Inc., 219 Wis. 2d 99, 112, 579
N.W.2d 217 (1998).
8
Heyde Cos., Inc. v. Dove Healthcare, LLC, 2002 WI 131,
¶13, 258 Wis. 2d 28, 654 N.W.2d 830 (citing Tatge, 219 Wis. 2d
at 111-12; see also Gary Van Zeeland Talent, Inc. v. Sandas, 84
Wis. 2d 202, 218-21, 267 N.W.2d 242 (1978).
5
No. 2015AP1530
which an employee agrees not to compete with a former employer,9
but also to other terms of an agreement including provisions
barring the solicitation of the employer's customers or former
customers,10 non-disclosure/confidentiality agreements between
employers and employees,11 and a no-hire provision between two
employers.12
¶8 These cases clearly demonstrate that the application
of Wis. Stat. § 103.465 depends upon whether the particular
terms of the agreement constitute a restraint of trade by
restricting competition or imposing an unreasonable restraint on
9
"A covenant [not to compete] typically provides that the
employee shall not work for a competitor or set up a competitive
business for himself for a specified period of time in a
designated geographical area." Harlan M. Blake, Employee
Agreements Not to Compete, 73 Harv. L. Rev. 625, 626 (1960).
For an example of such a traditional covenant not to
compete, see, e.g., Lakeside Oil Co. v. Slutsky, 8 Wis. 2d 157,
98 N.W.2d 415 (1959).
10
See, e.g., Star Direct, Inc. v. Dal Pra, 2009 WI 76,
¶¶19-41, 319 Wis. 2d 274, 767 N.W.2d 898 (holding that a
provision barring solicitation of an employer's customers was a
restraint of trade under Wis. Stat. § 103.465).
11
See, e.g., Gary Van Zeeland Talent, Inc. v. Sandas, 84
Wis. 2d 202, 218, 267 N.W.2d 242 (1978) (concluding that a non-
disclosure/confidentiality agreement between an employer and
employee was an unreasonable restraint of trade governed by Wis.
Stat. § 103.465).
12
Heyde Cos., 258 Wis. 2d 28, ¶¶13-16 (concluding that an
agreement between two employers in which one employer agreed not
to hire employees of the other employer was a restraint of trade
because "[t]he effect of the no-hire provision [was] to
restrict" employees' employment opportunities).
6
No. 2015AP1530
employees. These cases focused on the effect of the restraint
rather than its label.13
¶9 We conclude that Lanning's non-solicitation of
employees provision restricts 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 of Manitowoc
Company (including Lanning's current employer, SANY America).
Accordingly, we conclude that Lanning's non-solicitation of
employees provision is a restraint of trade governed by Wis.
Stat. § 103.465.
¶10 With regard to the second issue, we conclude that
Lanning's non-solicitation of employees provision is
unenforceable under Wis. Stat. § 103.465. It does not meet the
statutory requirement that the restriction be "reasonably
necessary for the protection of the employer." Wis. Stat.
§ 103.465.
¶11 Accordingly, we affirm the decision of the court of
appeals and remand the cause, as did the court of appeals, to
the circuit court with instructions to enter judgment in favor
of Lanning.
I
13
Heyde Cos., 258 Wis. 2d 28, ¶¶13-14.
7
No. 2015AP1530
¶12 To the extent that the facts affect the issues before
the court, no genuine dispute about material facts is presented.
¶13 Manitowoc Company is a manufacturer with two
divisions: a food service equipment division and a construction
crane division. Lanning began his employment with Manitowoc
Company in 1985 as a chief engineer in Manitowoc Company's crane
division. Lanning worked for Manitowoc Company for over 25
years. Lanning was successful, knowledgeable, and well-
connected within Manitowoc Company.
¶14 In 2008, Lanning signed an employment agreement with
Manitowoc Company that included provisions relating to
confidential information, intellectual property, and non-
solicitation of employees.14 The validity of only the non-
solicitation of employees provision is challenged in the instant
case.
¶15 Lanning terminated his employment with Manitowoc
Company effective January 6, 2010. Beginning on January 8,
2010, Lanning became the director of engineering for SANY
America, a direct competitor with Manitowoc Company's crane
division. Manitowoc Company claims that Lanning engaged in a
number of actions that violated the non-solicitation of
employees provision.
14
Over the course of his employment, Lanning signed
multiple employment agreements with Manitowoc Company. The 2008
employment agreement explicitly superseded all previous
agreements, and the parties agree that the 2008 employment
agreement is applicable in the instant case.
8
No. 2015AP1530
¶16 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.
¶17 Lanning's non-solicitation of employees provision
prohibits him, for two years following termination of his
employment, 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.
¶18 The circuit court concluded that even if Lanning's
non-solicitation provision is viewed as a restriction on trade
or competition subject to Wis. Stat. § 103.465, the provision
was reasonable and enforceable under the statute.
¶19 The court of appeals concluded that Lanning's non-
solicitation of employees provision was a restraint of trade
governed by Wis. Stat. § 103.465.15 It further concluded that
because the provision was not reasonable, it was not enforceable
under the statute. The court of appeals reversed the judgment
of the circuit court in favor of Manitowoc Company.
15
Manitowoc Co., 371 Wis. 2d 696, ¶17.
9
No. 2015AP1530
II
¶20 We first address the standard of review. This court
applies the same method of analysis to a motion for summary
judgment as does a circuit court. Summary judgment is
appropriate where, based on the pleadings, depositions,
interrogatories, and affidavits on file, there is no genuine
dispute as to any material fact, and a party is entitled to
judgment as a matter of law. Wis. Stat. § 802.08(2); Star
Direct, 319 Wis. 2d 274, ¶18; Belding v. Demoulin, 2014 WI 8,
¶13, 352 Wis. 2d 359, 843 N.W.2d 373; Green Spring Farms v.
Kersten, 136 Wis. 2d 304, 315-17, 401 N.W.2d 816 (1987); Mut.
Serv. Cas. Ins. Co. v. Brass, 2001 WI App 92, ¶4, 242
Wis. 2d 733, 625 N.W.2d 648, overruled on other grounds by Star
Direct, 319 Wis. 2d 274, ¶78 n.12.
¶21 The instant case requires us to interpret both a
statute and a written contract. The interpretation and
enforceability of both a statute and a written contract
ordinarily present questions of law that this court determines
independently of the circuit court and court appeals while
benefiting from the analyses of these courts. See, e.g.,
Moustakis v. DOJ, 2016 WI 42, ¶16, 368 Wis. 2d 677, 880
N.W.2d 142; Star Direct, 319 Wis. 2d 274, ¶18; Streiff v. Am.
Family Mut. Ins. Co., 118 Wis. 2d 602, 603 n.1, 348 N.W.2d 505(1984).
III
10
No. 2015AP1530
¶22 The first issue of law presented is whether Wis. Stat.
§ 103.465 applies to Lanning's non-solicitation of employees
provision.
¶23 We begin our discussion by setting forth the texts of
Wis. Stat. § 103.465 and Lanning's non-solicitation of employees
provision.
¶24 Wisconsin Stat. § 103.465 is broadly entitled
"Restrictive covenants in employment contracts" and refers
explicitly to a covenant by an employee not to compete with the
employer during or after the term of employment. It states as
follows 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:
A covenant by an assistant, servant or agent not to
compete with his or her employer or principal during
the term of the employment or agency, or after the
termination of that employment or agency, within a
specified territory and during a specified time is
lawful and enforceable only if the restrictions
imposed are reasonably necessary for the protection of
the employer or principal. Any covenant, described in
this section, imposing an unreasonable restraint is
illegal, void and unenforceable even as to any part of
the covenant or performance that would be a reasonable
restraint.
Wis. Stat. § 103.465.
¶25 The agreement between Manitowoc Company and Lanning is
entitled "Agreement Regarding Confidential Information,
Intellectual Property and Non-Solicitation of Employees." The
non-solicitation of employees provision at issue does not use
the words "covenant not to compete." Rather, Lanning agrees not
11
No. 2015AP1530
to solicit, induce, or encourage any employee(s) of Manitowoc
Company to terminate their employment with the Company. The
provision states as follows:
I agree that during my Employment by Manitowoc and for
a period of two years from the date my Employment by
Manitowoc ends for any reason, including termination
by Manitowoc with or without cause, I will not (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. As used herein,
the term "solicit, induce or encourage" includes, but
is not limited to, any of the following: (a)
initiating communications with an employee of
Manitowoc relating to possible employment; (b)
offering bonuses or additional compensation to
encourage employees of Manitowoc to terminate their
employment therewith and accept employment with a
competitor, supplier or customer of Manitowoc; (c)
referring employees of Manitowoc to personnel or
agents employed or engaged by competitors, suppliers
or customers of Manitowoc; or (d) referring personnel
or agents employed or engaged by competitors,
suppliers or customers of Manitowoc to employees of
Manitowoc.
¶26 Lanning's non-solicitation of employees provision does
not conform to "textbook examples" of a covenant not to compete
in which the employee is prohibited from engaging in competition
with a former employer. In contrast to a traditional covenant
not to compete, Lanning is free to obtain employment with a
competitor of Manitowoc Company. Manitowoc Company employees
are free to terminate employment with Manitowoc Company, be
employed by any other employer, and compete with Manitowoc
Company. Lanning is restricted from "poaching" any Manitowoc
12
No. 2015AP1530
Company employee.16 The provision restricting Lanning restrains
competition by limiting a competitor's access to the labor pool.
¶27 Manitowoc Company argues that Wis. Stat. § 103.465applies only to traditional covenants not to compete wherein an
employee agrees not to engage in business activities that are
competitive with those of the employer. As we stated
previously, however, our cases reveal that § 103.465 has been
applied to provisions that constitute restraints of trade other
than traditional covenants not to compete.
¶28 Time 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. § 103.465.17¶29 The cases state that "the explicit purpose of Wis.
Stat. § 103.465, as plainly stated in the statute, is to
invalidate covenants that impose unreasonable restraints on
employees"18 and that § 103.465 "essentially deals with restraint
of trade . . . regardless of whether a restriction is labeled a
'non-disclosure' provision or a 'covenant not to compete.'"19
16
Manitowoc Co., 371 Wis. 2d 696, ¶17.
17
See supra ¶¶6-8.
18
Wisconsin Stat. § 103.465 "evidences a strong public
policy against enforcement of trade restraints which are
determined to be unreasonable upon all employees". Tatge, 219
Wis. 2d at 114-15.
19
Heyde Cos., 258 Wis. 2d 28, ¶13 (citing Tatge v. Chambers
& Owen, Inc., 219 Wis. 2d , 99, 111-12, 579 N.W.2d 217 (1998);
Gary Van Zeeland Talent, 84 Wis. 2d at 218-21.
13
No. 2015AP1530
Whether 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.20
¶30 Accordingly, courts have applied Wis. Stat. § 103.465to traditional non-compete agreements, non-solicitation of
customer agreements, and non-disclosure/confidentiality
agreements between employers and employees as well as a no-hire
provision between two employers.21
¶31 In 1995,22 1997,23 and 2015,24 the legislature amended
Wis. Stat. § 103.465 but chose not to amend the statute in such
20
Heyde Cos., 258 Wis. 2d 28, ¶¶13-14 ("[A] restrictive
covenant may be made between employers that acts as a covenant
not to compete on the employees. . . . The effect of the no-
hire provision is to restrict the employment of Greenbriar's
employees; it is inconsequential whether the restriction is
termed a 'no-hire' provision between Dove and Greenbriar or a
'covenant not to compete' between Greenbriar and its
employees.").
21
See supra ¶¶6-8.
22
As adopted in 1957, Wis. Stat. § 103.465 (1957-58) read
as follows:
A covenant by an assistant, servant or agent not to
compete with his employer or principal during the term
of the employment or agency, or thereafter, within a
specified territory and during a specified time is
lawful and enforceable only if the restrictions
imposed are reasonably necessary for the protection of
the employer or principal. Any such restrictive
covenant imposing an unreasonable restraint is
illegal, void and unenforceable even as to so much of
the covenant or performance as would be a reasonable
restraint.
Ch. 444, Laws of 1957.
(continued)
14
No. 2015AP1530
a way as to undermine the court's broad application of the
statute. Legislative acquiescence to a judicial construction of
a statute gives rise to a presumption, albeit sometimes a weak
one, that an earlier judicial construction should stand.25 This
precept of statutory interpretation reinforces the principle of
A 1995 amendment replaced "his employer" with "his or her
employer." 1995 Wis. Act 225, § 347.
23
Wisconsin Stat. § 103.465 was amended by 1997 Wis. Act
253, § 81. The changes are shown in italics:
A covenant by an assistant, servant or agent not to
compete with his or her employer or principal during
the term of the employment or agency, or after the
termination of that employment or agency, within a
specified territory and during a specified time is
lawful and enforceable only if the restrictions
imposed are reasonably necessary for the protection of
the employer or principal. Any covenant, described in
this subsection, imposing an unreasonable restraint is
illegal, void and unenforceable even as to any part of
the covenant or performance that would be a reasonable
restraint.
The note to § 81 of the Act explains: "Replaces
nonspecific references with specific references for greater
readability and conformity with current style."
24
In 2015, Wis. Stat. § 103.465 was amended by the
Legislative Reference Bureau pursuant to § 35.17(2) to correct
obvious nonsubstantive errors. The words "in this subsection"
were changed to "in this section." See 2015 Wis. Act 197, § 51.
25
See, e.g., Force ex rel. Welcenbach v. Am. Family Mut.
Ins. Co., 2014 WI 82, ¶124 n.76, 356 Wis. 2d 582, 850
N.W.2d 866; Milwaukee Journal Sentinel v. City of Milwaukee,
2012 WI 65, ¶43 n.21, 341 Wis. 2d 607, 815 N.W.2d 367; Wenke v.
Gehl Co., 2004 WI 103, ¶¶32, 33, 35, 274 Wis. 2d 220, 682
N.W.2d 405; State v. Hansen, 2001 WI 53, ¶38, 243 Wis. 2d 328,
627 N.W.2d 195; Reiter v. Dyken, 95 Wis. 2d 461, 471-72, 290
N.W.2d 510 (1980).
15
No. 2015AP1530
stare decisis and supports the interpretation of the statute set
forth herein.26
¶32 Manitowoc Company maintains that the non-solicitation
provision does not restrict competition by Lanning or restrain
employees. Lanning and Manitowoc Company employees are free to
work for anyone, including a competitor, and competitors are
"free to hire any Manitowoc employee(s) to take any job at their
company . . . . By the plain language . . . it was not
Manitowoc's intent to prevent any employees from leaving or
26
In interpreting and applying Wis. Stat. § 103.465, the
concurrence renounces reliance on prior judicial interpretations
of the statute, interprets the statute anew, and would overrule
the decision in Heyde, a decision interpreting the statute that
has stood for 15 years and has never been repudiated by the
legislature. Neither Manitowoc Company nor Lanning has asked
this court to overrule Heyde.
The concurrence advocates an interpretive rule
significantly different from the generally accepted rule that
when a court interprets a statute, prior judicial
interpretations of the statute become "as much a part of the
statute as if plainly written into it originally." State ex
rel. Klinger v. Baird, 56 Wis. 2d 460, 468, 202 N.W.2d 31(1972). See also Champlin v. State, 84 Wis. 2d 621, 624, 267
N.W.2d 295 (1978) (quoting Klinger); Clean Water Action Council
of N.E. Wis. v. DNR, 2014 WI App 61, ¶16, 354 Wis. 2d 286, 848
N.W.2d 336 (quoting Klinger).
Ordinarily (and in the instant case), this court should not
reach beyond the issues presented in the petition for review and
should not overrule a prior judicial decision that the parties
accept as pertinent, without at least affording the parties an
opportunity to brief the issue of the continued validity of the
decision. This approach to judicial interpretation of a statute
comports with the important concepts of precedent and finality.
Stare decisis, although not an absolute rule, is important to
promote finality and predictability in the law and is undermined
by the concurrence's reasoning.
16
No. 2015AP1530
joining another employer, and/or to restrict their mobility or
ability to practice and earn a living in their chosen field.
Rather, the intent of the clause was to limit a key employee
like Lanning from raiding Manitowoc employees. . . ."27
According to Manitowoc Company, "the harm [to the Company] is
the loss of the employee itself——not any potential competition
that employee could provide against Manitowoc after leaving."28
¶33 The 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 prevents
Lanning from taking steps to persuade a Manitowoc Company
employee to leave Manitowoc Company, which would limit the
ability of Lanning and other Manitowoc Company employees from
working together in the future. Thus, the provision prevents
employees of Manitowoc Company from having complete information
regarding employment opportunities elsewhere. It limits a
potentially valuable professional resource Lanning would
otherwise have regarding resources in the labor market.
Although the law encourages the mobility of workers, Lanning's
non-solicitation of employees provision hinders the mobility of
27
Brief of Plaintiff-Respondent-Petitioner The Manitowoc
Company, Inc. at 31-32 (emphasis in brief).
28
Brief of Plaintiff-Respondent-Petitioner The Manitowoc
Company, Inc. at 39-40.
17
No. 2015AP1530
Manitowoc Company employees.29 This court has stated that "the
fundamental right of a person to make choices about his or her
own employment is well-established."30
¶34 In sum, the cases have interpreted Wis. Stat.
§ 103.465 as including more than the "textbook example" of an
employee covenant not to compete with his or her employer. In
the instant case, the effect of Lanning's non-solicitation of
29
"The law, however, does not protect against the raiding
of a competitor's employees. Rather, it encourages the mobility
of workers." Mut. Serv. Cas. Ins. Co. v. Brass, 2001 WI App 92,
¶17, 242 Wis. 2d 733, 625 N.W.2d 648, overruled on other grounds
by Star Direct, 319 Wis. 2d at ¶78 n.12; see also Genzyme Corp.
v. Bishop, 460 F. Supp. 2d 939, 947 (W.D. Wis. 2006) ("[T]he
public policy underlying Wis. Stat. § 103.465 is that Wisconsin
law favors the mobility of workers.").
30
Heyde Cos., 258 Wis. 2d 28, ¶22.
As the Supreme Court has recognized, the ability to make
choices about one's own employment "is an elementary part of the
rights of personal liberty . . . ." Prudential Ins. Co. of Am.
v. Cheek, 259 U.S. 530, 536 (1922).
Judge Learned Hand wrote regarding an employer's ability to
offer a job to a competitor's employee and the employee's
ability to take the job as follows:
Nobody has ever thought, so far as we can find, that
in the absence of some monopolistic purpose every one
has not the right to offer better terms to another's
employe, so long as the latter is free to leave. The
result of the contrary would be intolerable, both to
such employers as could use the employe more
effectively and to such employes as might receive
added pay. It would put an end to any kind of
competition.
Triangle Film Corp. v. Artcraft Pictures Corp., 250 F. 981, 982
(2d Cir. 1918).
18
No. 2015AP1530
employees provision is clear. The provision restricts one form
of competition with Manitowoc Company. It restricts Lanning
(and any employee of Manitowoc Company) from freely competing
against Manitowoc Company in the labor market by insulating any
Manitowoc Company employee from Lanning's solicitations.
¶35 We agree with the reasoning of the court of appeals
that Lanning's non-solicitation of employees provision is a
restraint of trade governed by Wis. Stat. § 103.465. As the
court of appeals explained:
It is no leap of logic to conclude that a provision
aimed at restricting a former employee from
"systematically poaching" the valuable and talented
employees of his former employer is a restraint of
trade. Lanning may not, among other things, compete
with Manitowoc by attempting to recruit Manitowoc's
best employees. While the NSE provision does not
circumscribe Lanning's own employment opportunities,
it nevertheless limits how Lanning——now employed by a
direct competitor——can compete with Manitowoc. In
short, the NSE provision does not allow for the
ordinary sort of competition attendant to a free
market, which includes recruiting employees from
competitors.
Lanning, 371 Wis. 2d 696, ¶17.
¶36 Our reasoning and conclusion are in accord with
federal courts interpreting Wisconsin law31 and with cases in
31
In Corporate Express Office Products, Inc. v. Brown, 2001
WL 34381111 (W.D. Wis. July 18, 2001), the non-solicitation of
employees provision was similar to Lanning's provision. The
federal district court held that although the employer had an
interest in retaining experienced employees, the non-
solicitation provision was not necessary to advance that
interest. Corporate Express, 2001 WL 34381111, at *7-8.
19
No. 2015AP1530
other jurisdictions interpreting non-solicitation of employees
provisions.32 These decisions have determined that similar non-
solicitation of employees provisions constitute restraints of
trade. These decisions are not binding on this court but are
persuasive.
¶37 For the reasons set forth, we conclude that the non-
solicitation of employees provision at issue is a restraint of
trade governed by Wis. Stat. § 103.465.
IV
¶38 Having concluded that Wis. Stat. § 103.465 applies to
Lanning's non-solicitation of employees provision, we address
32
See, e.g., Golder Assocs., Inc. v. Edge Envt'l, Inc.,
2007 WL 987458 (D. Colo. 2007), (finding that a similar non-
solicitation of employees agreement was governed by a Colorado
statute prohibiting "any covenant not to compete which restricts
the right of any person to receive compensation for performance
of skilled or unskilled labor" because "the non-solicitation
clause at issue in this case could be interpreted to as [sic]
having the effect of preventing the [employees] from working
together at [competitor] and, therefore, it is covered by
restraint [sic] of trade prohibition contained in [the
statute]"); Schmersahl, Treloar & Co., P.C. v. McHugh, 28
S.W.3d 345, 348-51 (Mo. Ct. App. 2000) (holding that a non-
solicitation of employees provision was a restraint of trade
because "[c]ompetition in the marketplace encompasses
competition in the labor market" and the provision can be used
to restrict the flow of competitive information about the labor
market, including the availability of opportunities and offers
of employment to an employer's at-will workforce and has the
effect of reducing competition in the labor market and is a
restrictive covenant); Lazer Inc. v. Kesselring, 823
N.Y.S.2d 834, 836-39 (N.Y. Sup. Ct. 2005) (concluding that "a
covenant not to solicit former co-employees is a species, albeit
a limited one, of a covenant not to compete in the broad
sense . . .").
20
No. 2015AP1530
the second issue of law presented, namely, whether the provision
is enforceable under § 103.465.
¶39 Beginning in Lakeside Oil Co. v. Slutsky, 8
Wis. 2d 157, 162-67, 98 N.W.2d 415 (1959), and continuing in the
case law thereafter, the court has interpreted Wis. Stat.
§ 103.465 as "establishing five prerequisites that a restrictive
covenant must meet in order to be enforceable."33
¶40 The five "prerequisites" that must be met are as
follows. The restraint must:
(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) provide a reasonable territorial limit;
(4) not be harsh or oppressive as to the employee; and
(5) not be contrary to public policy.
Star Direct, 319 Wis. 2d 274, ¶20.
¶41 If Lanning's non-solicitation of employees provision
fails to satisfy even one of these "prerequisites," the entire
non-solicitation of employees provision is invalid. By enacting
Wis. Stat. § 103.465, the legislature made a policy choice to
place the burden of drafting a reasonable restrictive covenant
on the employer, who often wields greater bargaining power and
33
Star Direct, 319 Wis. 2d 274, ¶20.
21
No. 2015AP1530
is generally in a better position to show that a restraint is no
broader than is necessary to protect the employer's business.34
34
In Streiff v. American Family Mutual Insurance Co., 118
Wis. 2d 602, 608-09, 614-15, 348 N.W.2d 505 (1984), the supreme
court described the background of Wis. Stat. § 103.465 in 1957.
It was enacted at the suggestion of a legislator who was
critical of our decision in the second Fullerton Lumber case,
Fullerton Lumber Co. v. Torborg, 274 Wis. 478, 80 N.W.2d 461(1957), in which the court "blue-penciled," that is, judicially
modified, an unreasonable restrictive covenant by giving it
effect to the extent that it might be reasonable:
The legislator wanted a restraint containing overly
broad and invalid provisions to be struck down in its
entirety; he apparently did not want the court to give
effect to an unreasonable restraint to the extent it
might be reasonable. The objection to the "Torberg"
practice, as the legislator noted, is that it tends to
encourage employers possessing bargaining power
superior to that of the employees to insist upon
unreasonable and excessive restrictions, secure in the
knowledge that the promise will be upheld in part, if
not in full.
* * * *
Courts and commentators have engaged in debate over
the equities of giving effect to reasonable aspects of
restraints in a covenant. An argument for giving
effect to reasonable aspects of a restraint is the
business need for restrictive covenants and the
difficulty for larger businesses to tailor each
covenant to the particular requirements of the
individual employee. A principal argument against
giving effect to reasonable aspects of a restraint is
that the employer can fashion ominous covenants which
affect the mobility of employees because of their in
terrorem effect on employees who respect contractual
obligations and their effect on competitors who do not
wish to risk legal difficulties. At least where the
restraint is indivisible, it is clear that our
legislature has balanced the employer's business needs
and the employee's interest in personal liberty and
has, by the adoption of sec. 103.465, opted not to
(continued)
22
No. 2015AP1530
¶42 We begin with the first prerequisite, that is, that
the Manitowoc Company must have a protectable interest
justifying the restriction on Lanning's employee's activities.
¶43 Manitowoc Company asserts that it has an interest in
protecting itself from "the loss of the employee(s) it trained
and invested time and capital in, and the institutional
understanding, experience, and intellectual capital they
possess."35
¶44 The text of the non-solicitation of employees
provision bars solicitation by Lanning of "any employee(s)" to
terminate employment with Manitowoc Company. The court
interprets and applies this language in accordance with the
maxims adopted for the interpretation of restrictive covenants.
give effect even to so much of the covenant as would
be a reasonable restraint. The legislature has in
sec. 103.465 instructed the court as to the equities
between the parties. Under sec. 103.465 if an
indivisible covenant imposes an unreasonable
restraint, the covenant is illegal, void, and
unenforceable even as to so much of the covenant as
would be a reasonable restraint.
See also Harlan M. Blake, Employee Agreements Not to Compete, 73
Harv. L. Rev. 625, 648 n.76 (1960) ("The employer, having a
fuller 'picture' of the company's interests and needs than any
employee, should be in a much better position to show that a
restraint is no more burdensome than needed to protect the
employer's legitimate interest. The employee, on the other
hand, would find it difficult to show that the restrain is
unreasonable.").
35
Brief of Plaintiff-Respondent-Petitioner The Manitowoc
Company, Inc. at 39.
23
No. 2015AP1530
¶45 A restraint of trade to which Wis. Stat. § 103.465applies is interpreted in a reasonable way to give the words
their plain meaning, to give effect where possible to the entire
provision, and to avoid absurd results. Star Direct, 319
Wis. 2d 274, ¶62. Within this maxim, restrictive covenants are
disfavored at law, subject to close scrutiny, and are read in
favor of the employee. Star Direct, 319 Wis. 2d 274, ¶62.
¶46 The words "any employee" in the non-solicitation of
employees provision prohibits Lanning from soliciting every one
of Manitowoc Company's 13,000 world-wide employees. The words
"any employee" mean, in common parlance, every employee. The
court has in a number of cases explained that a phrase modified
by the word "any" indicates broad application.36
¶47 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.
36
State v. Jensen, 2010 WI 38, ¶29, 324 Wis. 2d 586, 782
N.W.2d 415 (noting in its interpretation of Wis. Stat.
§ 971.19(12) that "a phrase modified by the word 'any' indicates
broad application.") (internal quotation marks and citation
omitted); Marotz v. Hallman, 2007 WI 89, ¶25, 302 Wis. 2d 428,
734 N.W.2d 411 (the word "any" modifying "person or
"organization" in Wis. Stat. § 632.32(5)(i)1. indicates broad
application); Burbank Grease Servs., LLC v. Sokolowski, 2006
103, ¶22, 294 Wis. 2d 274, 717 N.W.2d 781 (the broad dictionary
definition of word "any" is used to define "any" in Wis. Stat.
§ 134.90(6)(b)2.).
24
No. 2015AP1530
¶48 Manitowoc Company asserts a protectable interest in
protecting its investment of time and capital involved in
recruiting, training, and developing its employee base from
"poaching" by a "former employee who ha[s] full awareness of the
talent and skill set of said employee base."37 At trial,
Manitowoc Company presented evidence to establish the financial
and non-monetary costs and harm it experienced in losing and
trying to replace employees.38 Manitowoc Company asserts that
the loss of employees harms the Company regardless of whether
the employee goes to work for a competitor or a non-competitor
of Manitowoc Company.
¶49 The argument that Manitowoc Company 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."39 The cases
37
Brief of Plaintiff-Respondent-Petitioner The Manitowoc
Company, Inc. at 39.
38
Brief of Plaintiff-Respondent-Petitioner The Manitowoc
Company, Inc. at 13-14.
39
Brass, 242 Wis. 2d 733, ¶17, overruled on other grounds
by Star Direct, 319 Wis. 2d 274, ¶78 n.12.; see also Gary Van
Zeeland Talent, 84 Wis. 2d at 214 ("[S]o long as a departing
employee takes with him no more than his experience and
intellectual development that has ensued while being trained by
another, and no trade secrets or processes are wrongfully
appropriated, the law affords no recourse.").
(continued)
25
No. 2015AP1530
and literature explain that 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.40 Ordinarily, a stranger may entice
The Gary Van Zeeland Talent case cites Abbott Laboratories
v. Norse Chemical Corp., 33 Wis. 2d 445, 463, 147 N.W.2d 529(1967) (setting forth the factors a court must consider when
determining whether certain material qualifies as a "trade
secret") and K.H. Larsen, Annotation, Former employee's duty, in
absence of express contract, not to solicit former employer's
customers or otherwise use his knowledge of customer lists
acquired in earlier employment, 28 A.L.R. 3d 7, § 4 (1969)
(collecting cases regarding the right of an employee to use
general knowledge and experience gained in former employment).
40
K.H. Larsen, Annotation, Former employee's duty, in
absence of express contract, not to solicit former employer's
customers or otherwise use his knowledge of customer lists
acquired in earlier employment, 28 A.L.R. 3d 7, § 4[a]
(Cumulative Supp.):
Courts have universally recognized the former
employee's right to use, in competition with his
former employer, general knowledge, skill, and
experience acquired in the former employment.
Harlan M. Blake, Employee Agreements Not to Compete, 73
Harv. L. Rev. 625, 652 (1960) (footnotes omitted):
It has been uniformly held that general knowledge,
skill, or facility acquired through training or
experience while working for an employer appertain
exclusively to the employee. The fact that they were
acquired or developed during the employment does not,
by itself, give the employer a sufficient interest to
support a restraining covenant, even though the on-
the-job training has been extensive and costly. In
the absence of special circumstances the risk of
future competition from the employee falls upon the
employer and cannot be shifted, even though the
(continued)
26
No. 2015AP1530
Manitowoc Company employees to accept employment with a
competitor of the Company.41 The court has declared that "[a]n
employer is not entitled to be protected against legitimate and
ordinary competition of the type that a stranger could give."42
¶50 Manitowoc Company drafted the non-solicitation of
employees provision and could have tailored the language to its
specific needs. It does not argue that the non-solicitation of
employees provision is limited to Lanning's solicitation of only
certain employees. Manitowoc Company does not contend that it
intended to limit the words to apply only to the solicitation of
employees with sensitive or company-specific information or to
possible damage is greatly increased by experience
gained in the course of the employment.
McHugh, 28 S.W.3d at 350:
[An employer does not have a proprietary interest in
its employees at will or in their skills.] The normal
skills of a trade are not included in an employer's
protectable interest. Thus, the basic skill of a
craftsman will not support a restrictive
covenant. . . . The fact of an employer-employee
relationship, standing alone, is not sufficient to
cause a confidential relationship to exist as to
knowledge which is the natural product of the
employment.
For a collection of cases, see 3 Louis Altman & Malla
Pollack, Callmann on Unfair Competition, Trademarks and
Monopolies § 16:44 (4th ed. Cum. 2017).
41
Lakeside Oil, 8 Wis. 2d at 163.
42
Lakeside Oil, 8 Wis. 2d at 163; see also Star Direct, 319
Wis. 2d 274, ¶56 (citing Lakeside).
27
No. 2015AP1530
the solicitation of employees with whom Lanning has worked or to
those employees with skill sets with which Lanning was familiar.
¶51 Rather, Manitowoc Company argues that the court should
apply a "sliding scale" to gauge whether the non-solicitation
provision meets the prerequisites of Wis. Stat. § 103.465,
maintaining that because the non-solicitation of employees
provision is less onerous than a traditional covenant not to
compete, it should receive less-exacting scrutiny. In other
words, the Company argues that a less burdensome non-
solicitation of employees provision should not be held to the
same legal requirements as a traditional covenant not to
compete.43
¶52 The sliding scale, Manitowoc Company argues, would
recognize that significant restrictions imposed on an employee
place a significant burden on the employer to justify the
restriction by showing that the restriction is no broader than
is necessary to protect a legitimate business interest.44 Less
significant restrictions imposed on an employee should place a
less significant burden on the employer to justify the
restriction, Manitowoc Company argues.
¶53 We reject Manitowoc's proposed "sliding scale" approach
that would subject various restraints of trade and competition
43
Brief of Plaintiff-Respondent-Petitioner The Manitowoc
Company, Inc. at 41.
44
Brief of Plaintiff-Respondent-Petitioner The Manitowoc
Company, Inc. at 42.
28
No. 2015AP1530
to different legal standards. The sliding scale approach has no
basis in Wisconsin law.
¶54 Wisconsin Stat. § 103.465 does not create separate
legal standards applicable to traditional and non-traditional
non-compete provisions. Our legislature has balanced the
employer's business needs and the employee's interest in
personal liberty under § 103.465 and has declared that if an
agreement imposes an unreasonable restraint, it is illegal,
void, and unenforceable even as to so much of the covenant as
would be a reasonable restraint. We are bound by the
legislature's decision.
¶55 Because Lanning's non-solicitation of employees
provision restrains trade by restraining competition and
inhibiting the mobility of employees, it must meet all five
prerequisites identified in Lakeside Oil and Star Direct in
order to be enforceable under Wisconsin law. Manitowoc Company
has the burden to prove that Lanning's non-solicitation of
employees provision meets all five prerequisites.45
¶56 The plain language of Lanning's non-solicitation of
employees provision creates 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
45
Star Direct, 319 Wis. 2d 274, ¶20.
29
No. 2015AP1530
any Manitowoc Company employee to take any position with any
competitor, supplier, or customer of Manitowoc Company.
¶57 Lanning does not have specialized knowledge about all
of Manitowoc Company's 13,000 world-wide employees across both
its construction crane and food service equipment divisions.
Lanning does not have a relationship with every Manitowoc
Company employee. Yet Lanning's non-solicitation of employees
provision prevents him from encouraging any Manitowoc Company
employee to terminate his or her employment.
¶58 Noting the extensive reach of the language of the non-
solicitation of employees provision, the court of appeals
explained that "Manitowoc has drafted a provision that requires
it to prove that it has a protectable interest in preventing
Lanning from encouraging any employee to leave Manitowoc for any
reason, or to take any job with any competitor, supplier, or
customer." Lanning, 371 Wis. 2d 696, ¶30.
¶59 In applying the prerequisites that must be met under
Wis. Stat. § 103.465, we conclude, as did the court of appeals,
that the non-solicitation of employees provision is overbroad on
its face. Without a specified territory or class of employees,
the provision restricts Lanning's conduct as to all employees of
Manitowoc Company everywhere. Lanning's non-solicitation of
employees provision covers each of the 13,000 Manitowoc Company
employees regardless of the business unit in which they work or
where in the world they are located.
¶60 We agree with the court of appeals that Manitowoc
Company has failed to satisfy the first prerequisite, namely
30
No. 2015AP1530
that Manitowoc Company does not have a protectable interest
justifying the restriction imposed on the activity of the
employee. Because our conclusion as to the first prerequisite
is dispositive, we need not and do not consider the other four
prerequisites.
¶61 The non-solicitation of employees provision cannot
survive simply because Manitowoc Company seeks to enforce the
non-solicitation provision in the instant case in a narrower
situation than that which is compelled by the plain language of
the agreement.46 Enforcing an overbroad restraint to the
extent it can be reasonably enforced is exactly what § 103.465
was enacted to prevent.
¶62 A non-solicitation of employees provision may be
enforceable under Wis. Stat. § 103.465 if it is reasonably
necessary to protect the employer and reasonable as to time,
geography, and type of conduct covered.47 Manitowoc Company
failed to show that it has a protectable interest justifying the
sweeping restriction imposed by the plain language on Lanning's
non-solicitation of employees. Lanning's non-solicitation
provision does not meet the prerequisites under § 103.465.
¶63 For the reasons set forth, we conclude that Wis. Stat.
§ 103.465 applies to Lanning's non-solicitation of employees
provision. Because Lanning's non-solicitation of employees
46
Manitowoc Co., 371 Wis. 2d 696, ¶19.
47
Lakeside Oil, 8 Wis. 2d at 163-67.
31
No. 2015AP1530
provision does not meet the statutory requirement that the
restriction be "reasonably necessary for the protection of the
employer," it is an unreasonable restraint of trade
unenforceable under the statute.
¶64 Accordingly, the cause is remanded to the circuit
court with instructions to enter judgment in favor of Lanning.
By the Court.—The decision of the court of appeals is
affirmed.
32
No. 2015AP1530.rgb
¶65 REBECCA GRASSL BRADLEY, J. (concurring). I join the
lead opinion's decision affirming the court of appeals and its
holding that Wis. Stat. § 103.465, entitled "Restrictive
covenants in employment contracts," applies to Lanning's
nonsolicitation of employees covenant (NSE). I also agree that
this NSE is unreasonable under the Lakeside Oil1 prerequisites.
I write separately because the lead opinion neglects to
undertake a textual analysis of § 103.465, instead grounding its
interpretation of the statute almost exclusively in Wisconsin
case law in which the court has interpreted and applied
§ 103.465 expansively, sometimes straying far from the text in
advancing policy choices that should be made legislatively, not
judicially. For example, the lead opinion liberally cites Heyde
Cos., Inc. v. Dove Healthcare, LLC, 2002 WI 131, 258 Wis. 2d 28,
654 N.W.2d 830, which should be overruled as unsound in
principle because its analysis is patently wrong. Additionally,
I caution that merely because the court concludes § 103.465
applies to this NSE, not every NSE provision necessarily falls
under the purview of that statute.
I
¶66 The lead opinion skips the critical first step of
statutory analysis——examining the plain language of the text.
In abandoning this process, the lead opinion risks reading into
Wis. Stat. § 103.465 imagined words derived from the court's
perception of the legislature's unspoken policies and purpose.
1
Lakeside Oil Co. v. Slutsky, 8 Wis. 2d 157, 98 N.W.2d 415(1959).
1
No. 2015AP1530.rgb
Of course, legislative policies and purpose may aid the court in
its interpretative function, but only to the extent they are
discernable from the actual text of the statute.2
¶67 For this reason, statutory analysis must begin with
the plain language of the statute. State ex rel Kalal v. Cir.
Ct. for Dane Cty., 2004 WI 58, ¶45, 271 Wis. 2d 633, 681
N.W.2d 110 (citations omitted). "Statutory language is given
its common, ordinary, and accepted meaning, except that
technical or specially-defined words or phrases are given their
technical or special definitional meaning." Id. (citations
omitted). Where "the meaning of the statute is plain, we
ordinarily stop the inquiry."3 Id. (citations omitted).
Generally, statutory meaning comes from examining the text,
context and structure of the statute. See Wisconsin Carry, Inc.
v. City of Madison, 2017 WI 19, ¶20 n.15, 373 Wis. 2d 543, 892
N.W.2d 233.
¶68 The text of Wis. Stat. § 103.465 is relatively plain.
For the most part, the dissent correctly and succinctly examines
the relevant words and their ordinary meanings. Dissent, ¶¶10-
14. In summary and in the context of the facts presented here,
2
"[T]he purpose must be derived from the text, not from
extrinsic sources such as legislative history or an assumption
about the legal drafter's desires." Antonin Scalia & Bryan A.
Garner, Reading Law: The Interpretation of Legal Texts 56
(2012).
3
The court does not consult extrinsic sources unless the
statute is ambiguous, that is to say, "it is capable of being
understood by reasonably well-informed persons in two or more
senses." State ex rel Kalal v. Cir. Ct. for Dane Cty., 2004 WI
58, ¶46, 271 Wis. 2d 633, 681 N.W.2d 110 (citations omitted).
2
No. 2015AP1530.rgb
§ 103.465 governs only covenants between an employer and its
employee in which the employee agrees not to compete with the
employer. The enforceability of such a covenant depends in part
upon the inclusion of limits on its duration and territorial
scope. Its restrictions must also be "reasonably necessary for
the protection of the employer."
¶69 The crux of the issue presented in this case is
whether this NSE constitutes a covenant not to compete within
the meaning of Wis. Stat. § 103.465. While I agree with the
lead opinion's conclusion that § 103.465 governs this NSE, I
depart from its over-expansive analysis of the statute.
¶70 Because this court has never applied the statute to an
NSE between an employer and an employee, it is fundamental to
first identify what an NSE is. Black's Law Dictionary defines a
"nonsolicitation agreement" as "[a] promise . . . in . . . an
employment contract, to refrain, for a specified period of time,
from . . . enticing employees to leave a company."
Nonsolicitation agreement, Black's Law Dictionary 1221 (10th ed.
2014). Here, Lanning entered into a nonsolicitation agreement
by promising that he would "not (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."
¶71 In order to determine if this NSE may be subject to
close scrutiny under Wis. Stat. § 103.465, I begin with the
types of restrictive covenants the text of the statute covers.
The first sentence of the statute identifies as its subject
3
No. 2015AP1530.rgb
matter "[a] covenant . . . not to compete." The dissent defines
"compete" as "the struggle for commercial advantage," equating
competition with actions by an employee laboring for commercial
advantage over his or her employer. This definition broadly
encompasses all sorts of restrictive covenants. The dissent,
however, does not consider the phrase "covenant not to compete"
as a legal term of art.
¶72 Black's Law Dictionary defines "covenant not to
compete" as "[a]n agreement, generally part of a contract of
employment . . . in which the covenantor agrees for a specific
period of time and within a particular area to refrain from
competition with the covenantee." Covenant not to compete,
Black's Law Dictionary 364 (6th ed. 1990). The title of Wis.
Stat. § 103.465 also refers to covenants not to compete as
"Restrictive covenants in employment contracts."4 In the context
of an employment contract, Black's Law Dictionary defines
"[r]estrictive covenant" as a provision that "limit[s] a
contracting party after termination of the contract in
performing certain work for a period of time within a certain
4
Under Wis. Stat. § 990.001(6), "titles to subchapters,
subsections, paragraphs and subdivisions of the statutes and
history notes are not part of the statutes." "Although titles
are not part of statutes, see Wis. Stat. § 990.001(6), they may
be helpful in interpretation. Nevertheless text must control
over title." Aiello v. Village of Pleasant Prairie, 206 Wis. 2d
68, 73, 556 N.W.2d 697 (1996). "The title and headings [of a
statute] are permissible indicators of meaning" although "a
title or heading should never be allowed to override the plain
words of a text." Scalia & Garner, supra note 2, at 221-22.
Here, the title and the text are harmonious.
4
No. 2015AP1530.rgb
geographic area." Restrictive covenant, id. at 1315. While the
NSE does not altogether prohibit Lanning from going to work for
a competitor, it does restrain Lanning from soliciting,
inducing, or encouraging any Manitowoc employee from accepting
employment with any Manitowoc competitor, thereby limiting
Lanning in performing certain work——namely, recruitment for his
new employer, a competitor of Manitowoc's. Notwithstanding the
NSE's label, it constitutes a restrictive covenant by an
employee not to engage in a particular form of competition with
the employer both during his employment and for a two-year
period after his employment ends. Accordingly, Lanning's NSE is
a type of covenant "described in this section" under § 103.465.
¶73 The dissent reaches the opposite conclusion but errs
in adopting a cramped construction of what it means to "compete"
with a former employer. Proposing a definition of competition
as "the struggle for commercial advantage," the dissent then
inexplicably asserts the NSE "protects against only the raiding
of Manitowoc's key employees by Lanning" but "does not prevent
Lanning from competing with Manitowoc." Dissent, ¶38. The
dissent thereby narrowly rewrites the scope of the NSE, which is
clearly much broader. By its very terms, the NSE applies not
only to key employees but "any employee(s)" and the NSE
prohibits not only "raiding" of "key" employees but also, for
example, encouraging an entry-level employee to terminate his or
her employment to pursue higher education. For this reason
(among others), the lead opinion correctly concludes that the
NSE is not reasonably necessary for Manitowoc's protection as
5
No. 2015AP1530.rgb
Manitowoc cannot demonstrate a protectable interest in
prohibiting Lanning from encouraging an unskilled Manitowoc
employee to retire in order to spend more time with family (an
example aptly stated by the court of appeals in this case).
Manitowoc Co. v. Lanning, 2016 WI App 72, ¶24, 371 Wis. 2d 696,
885 N.W.2d 798.
¶74 The dissent proceeds to adopt the internally
contradictory position of Manitowoc. On one hand, it notes that
"Lanning and SANY's recruitment efforts were successful. Key
employees left Manitowoc and joined SANY." Dissent, ¶6. The
dissent accurately identifies the adverse effect on the employer
(here, Manitowoc): "the former employer will become a less
effective competitor." Dissent, ¶45. Nonetheless, the dissent
views Lanning's role as something other than competing with
Manitowoc despite the obvious "commercial advantage" to Lanning
individually in enhancing his new employer's competitive
position in the marketplace at the expense of Manitowoc.
Contrary to the dissent's construction, nothing in the text of
Wis. Stat. § 103.465 restricts its application to covenants not
to work for the employer's competitor and nothing in the
statutory text exempts covenants not to compete on behalf of the
employer's competitor. Logically, recruiting Manitowoc
employees to join a Manitowoc competitor is a form of
competition by Lanning and that aspect of the NSE's restriction
subjects it to the close scrutiny of § 103.465.
II
6
No. 2015AP1530.rgb
¶75 While the dissent's interpretation of Wis. Stat.
§ 103.465 is too restrictive, the lead opinion errs in the other
direction. Typically relying on the second sentence of Wis.
Stat. § 103.465, referring to "any covenant described in this
section imposing an unreasonable restraint," this court over
time opened wide the semantic door through which an assortment
of restrictive covenants were brought under § 103.465's purview.
See lead op., ¶¶6-8; Tatge v. Chambers & Owen, Inc., 219 Wis. 2d
99, 112, 579 N.W.2d 217 (1998) (reasoning that it "would be an
exercise in semantics to overlook" § 103.465's applicability to
different types of restrictive covenants "merely
because . . . the agreement is not labeled a 'covenant not to
compete'"). For example, in Heyde the court concluded that a
no-hire provision between two companies "acts as a restrictive
covenant on [the covenantee's] employees" even though the
covenant was not made in an employment contract and was not
otherwise made by any employee; therefore, it could not possibly
constitute a "covenant described in this section," regardless of
whether it in effect operated to restrict the employment
opportunities of the covenantee's employees.
¶76 The plain language of Wis. Stat. § 103.465 applies
only to certain covenants between an employer and its
"assistant, servant or agent." As the dissent notes, "servant"
encompasses an employee. Dissent, ¶11. Nothing in the text
intimates an extension of its application beyond the employer-
employee relationship. Nonetheless, the court in Heyde set the
statutory text aside and divined an overriding statutory
7
No. 2015AP1530.rgb
"purpose" that could be advanced only by ignoring certain words
in the statute so as to capture contracts between two businesses
within the ambit of § 103.465. Relying on Heyde, the lead
opinion in this case lends continued but unwarranted credence to
Heyde's erroneous application of the statute by concluding
"Lanning's nonsolicitation of employees provision is a restraint
of trade governed by Wis. Stat. § 103.465" because "the
limitation on Lanning also affects access to the labor pool by a
competitor of Manitowoc Company (including, Lanning's current
employer SANY America)" and "hinders the mobility of Manitowoc
Company employees." Lead op., ¶¶9, 33.
¶77 The lead opinion mistakenly emphasizes a relationship
not contemplated by the statute, namely one between two
employers, SANY and Manitowoc, as well as the NSE's effect on
the mobility of Manitowoc employees generally. Other than
Lanning himself, no SANY or Manitowoc employees are party to the
NSE; therefore, neither SANY nor Manitowoc workers are
considerations in applying Wis. Stat. § 103.465. Accordingly,
we should not base our interpretation of the statute on the
NSE's effect, if any, on SANY's ability to compete with
Manitowoc or the mobility of its workers generally. The focal
relationship under § 103.465 is the one between the employer,
Manitowoc, and the employee, Lanning. In basing part of its
determination regarding the statute's applicability on SANY's
ability to compete and Manitowoc employees' mobility, the lead
opinion further widens the rabbit hole encircling Wis. Stat.
§ 103.465 by extending the statute beyond the only contract
8
No. 2015AP1530.rgb
mentioned in the statute——a covenant between an employer and its
assistant, servant, or agent.
¶78 Because Heyde provides the foundation for courts to
disregard the plain language of Wis. Stat. § 103.465 in order to
apply it inappropriately in the name of good public policy, I
would overrule it as unsound in principle. Decisions to
overrule prior case law depend on the presence of one or more of
the following circumstances:
(1) Changes or developments in the law have undermined
the rationale behind a decision; (2) there is a need
to make a decision correspond to newly ascertained
facts; (3) there is a showing that the precedent has
become detrimental to coherence and consistency in the
law; (4) the prior decision is "unsound in principle;"
or (5) the prior decision is "unworkable in practice."
Bartholomew v. Wis. Patients Comp. Fund & Compcare Health Servs.
Ins. Corp., 2006 WI 91, ¶33, 293 Wis. 2d 38, 717 N.W.2d 216(citing Johnson Controls, Inc. v. Employers Ins. of Wausau, 2003
WI 108, ¶¶98-99, 264 Wis. 2d 60, 665 N.W.2d 257). Although
principles of statutory interpretation predating Kalal
"generat[ed] some analytical confusion," 271 Wis. 2d 633, ¶43,
the basic tenets of plain language interpretation were well
established when this court decided Heyde. See, e.g., Moorman
Mfg. Co. v. Indus. Comm'n, 241 Wis. 200, 208, 5 N.W.2d 743(1942)("The meaning of a legislative act must be determined from
what it says——not by what the framer of the act intended to say
or what he thought he was saying."); Nekoosa-Edwards Paper Co.
v. Pub. Serv. Comm'n, 8 Wis. 2d 582, 591, 99 N.W.2d 821 (1959)
("The meaning of a legislative act must be determined from the
language used."); Kalal, 271 Wis. 2d 633, ¶45; Wisconsin Carry,
9
No. 2015AP1530.rgb
Inc., 373 Wis. 2d 543, ¶20 n.15. See generally Daniel Suhr,
Interpreting Wisconsin Statutes, 100 Marq. L. Rev. 969 (2017).
¶79 This court began its analysis in Heyde by
acknowledging that Wis. Stat. § 103.465 "only refers to
covenants between employers and employees"; nevertheless, it
wholly ignored this language in favor of a liberal construction
to achieve what it deemed the legislature's purpose underlying
the statute. 258 Wis. 2d 28, ¶13-15. The text of the statute,
however, is devoid of any mention of this "purpose." In
adopting this interpretation, the Heyde court deviated from what
already was a fundamental principle of statutory construction——
interpreting a statute to mean what the text actually says.
¶80 The Heyde court justified its application of the
statute to a no-hire provision in a services contract between
two businesses because by "restricting one employer's ability to
hire former employees of the other employer," by "indirection,"
the covenant restricted "the employees' future opportunities of
employment." Heyde, 258 Wis. 2d 28, ¶14; id., ¶28 (Abrahamson,
J., concurring). This interpretation flouted the statute's
language in order to favor "those intended to benefit from" Wis.
Stat. § 103.465, never mind the statute's utter silence on whom
the legislature intended to advantage. Id., ¶15.
¶81 Indeed, until Heyde, no Wisconsin court had ever
applied Wis. Stat. § 103.465 to any restrictive covenant other
than those "by an assistant, servant or agent not to compete
with his or her employer or principal." The Heyde court boldly
labeled this unprecedented leap beyond the plain text
10
No. 2015AP1530.rgb
"inconsequential." Id., ¶14. The Heyde court's failure to give
effect to the actual words of the statute in order to advance
judicial notions of the public interest propels the lead opinion
in this case along an unsound analytical path. Although the
lead opinion correctly concludes that § 103.465 applies to
Lanning's NSE, it incorrectly supports its conclusion with
Heyde's shaky reasoning: because the NSE hinders the mobility
of Manitowoc employees and affects SANY's ability to compete
with Manitowoc, the statute applies. In order to steer the
scope of § 103.465 back to its textual bounds, I would overrule
Heyde as unsound in principle and reinstitute a plain language
interpretation of the statute, confining its application to an
employee's covenant not to compete with an employer.5
5
The people of Wisconsin should be wary of the lead
opinion's suggestion that prior judicial interpretations of a
statute become set in stone once decreed. Lead op., ¶31 n.26.
Reflexively cloaking every judicial opinion with the adornment
of stare decisis threatens the rule of law, particularly when
applied to interpretations wholly unsupported by the statute's
text. In evaluating whether to persist in upholding a decision
that elevated judicially-imagined legislative purpose over the
words the legislature actually enacted, "[i]t is well to keep in
mind just how thoroughly [the court's opinion] rewrote the
statute it purported to construe." Johnson v. Transp. Agency,
480 U.S. 616, 670 (1987) (Scalia, J., dissenting). When a
judicial opinion like Heyde replaces the words the legislature
actually wrote with language the court preferred, in advancing
the court's own policy choices, courts of last resort are duty-
bound to correct the prior court's error.
(continued)
11
No. 2015AP1530.rgb
¶82 The dissent warns that the outcome of the lead
opinion's holding will leave employers "unable to prevent
raiding of their key employees by a former employee." Dissent,
¶45. Employers are not so hamstrung. The NSE Lanning signed
could have been narrowly drawn to protect a legitimate interest
of Manitowoc and to satisfy the other prerequisites identified
in Lakeside Oil. Finally, while the court concludes that Wis.
Stat. § 103.465 applies to Lanning's NSE, this conclusion should
not be interpreted to mean that § 103.465 will categorically
Finally, the lead opinion's conclusion that we can glean
anything from the legislature's inaction in the 15 years
following Heyde has long been discredited. "[I]t [is]
impossible to assert with any degree of assurance that
congressional failure to act represents (1) approval of the
status quo, as opposed to (2) inability to agree upon how to
alter the status quo, (3) unawareness of the status quo, (4)
indifference to the status quo, or even (5) political
cowardice." Id. at 672. "[E]ven if we were prepared to let
members of Congress authoritatively express their collective
ratification of a judicial decision without using the formal
legislative process, the failure to pass an override bill is
weak evidence of any such collective ratification. In most
cases, it is easy to imagine that Congress would not have
overridden the opposite decision either. After all, enacting a
new statute is a lot harder than not enacting a new statute."
Caleb Nelson, Stare Decisis and Demonstrably Erroneous
Precedents, 87 Va. L. Rev. 1, 77 (2001). The lead opinion
invokes the importance of promoting finality and predictability
in the law in its application of stare decisis to Heyde.
However, Heyde "is a demonstration not of stability and order,
but of the instability and unpredictable expansion which the
substitution of judicial improvisation for statutory text has
produced." Johnson, 480 U.S. at 672. Because Heyde's
interpretation of Wis. Stat. § 103.465 finds no mooring in
statutory text, it does not deserve the status of inalterable
law that stare decisis would afford it.
12
No. 2015AP1530.rgb
apply to every NSE. Applying § 103.465 to a particular
restrictive covenant always requires a fact-specific inquiry.
¶83 I agree with the lead opinion that Wis. Stat.
§ 103.465 applies to this NSE, and under the Lakeside Oil
prerequisites, it is unreasonable and therefore unenforceable.
Because the lead opinion looks beyond the text of the statute to
consider the effect of this NSE on Manitowoc's workforce and
competitors rather than solely the employee restrained by the
covenant, I respectfully concur.
¶84 I am authorized to state that Justices MICHAEL J.
GABLEMAN and DANIEL KELLY join this concurrence.
13
No. 2015AP1530.pdr
¶85 PATIENCE DRAKE ROGGENSACK, C.J. (dissenting). The
lead opinion distorts the plain meaning of Wis. Stat. § 103.465,
thereby changing it from a statute that balanced the rights of
employees and their employers into a broad mandate that prevents
employers from protecting their businesses from 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 marketplace.
¶86 Because I conclude that the Non-Solicitation of
Employees (NSE) clause in Lanning's employment contract with
Manitowoc does not come within the plain meaning of Wis. Stat.
§ 103.465 and is enforceable, I respectfully dissent.
I. BACKGROUND
¶87 Manitowoc, a Wisconsin employer, participates in a
global market, where one of its divisions manufactures and
services large cranes. Lanning was a contract employee of
Manitowoc's crane division, where he worked as an engineer for
more than 24 years. During his employment he signed several
contracts of employment with Manitowoc; however, all parties
agree that the contract at issue here was signed August 11,
2008.
¶88 Manitowoc was concerned with protecting its
confidential information that permitted it to compete in a
global marketplace, and it emphasized that concern in Lanning's
employment contract. The NSE clause in Lanning's contract with
1
No. 2015AP1530.pdr
Manitowoc was preceded by the following acknowledgement that was
set out in all caps:
I AM EMPLOYED OR MAY BE EMPLOYED BY MANITOWOC IN A
CAPACITY IN WHICH I MAY RECEIVE OR CONTRIBUTE TO
CONFIDENTIAL INFORMATION. IN CONSIDERATION OF SUCH
EMPLOYMENT OR CONTINUED EMPLOYMENT, AND THE WAGES,
SALARY OR COMMISSIONS AND OTHER EMPLOYEE BENEFITS IN
COMPENSATION FOR MY SERVICES, AND IN CONSIDERATION OF
BEING GIVEN ACCESS TO CONFIDENTIAL INFORMATION, I
AGREE TO ALL OF THE FOLLOWING:
¶89 As a Manitowoc employee who had access to Manitowoc's
confidential information, Lanning agreed:
(2) Non-Solicitation of Employees. I agree that
during my Employment by Manitowoc and for a period of
two years from the date my Employment by Manitowoc
ends for any reason, including termination by
Manitowoc with or without cause, I will not (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.
¶90 In January 2010, Lanning terminated his employment
with Manitowoc and went to work for SANY, a worldwide competitor
of Manitowoc's crane division. Shortly after joining SANY,
Lanning and SANY began an aggressive attack on Manitowoc, as
SANY attempted to hire Manitowoc's skilled employees. For
example, Lanning took a Manitowoc employee to lunch during
SANY's recruitment efforts. He accompanied another employee on
a SANY plant tour in China and participated in SANY interviews
of Manitowoc employees. Lanning and SANY's recruitment efforts
were successful. Key employees left Manitowoc and joined SANY.
¶91 Lanning has not denied that he violated the NSE clause
in his employment contract. The circuit court found that he
2
No. 2015AP1530.pdr
breached his contract with Manitowoc and awarded compensatory
damages. The court of appeals reversed.
II. DISCUSSION
A. Standard of Review
¶92 This case turns on the interpretation and potential
application of Wis. Stat. § 103.465. Statutory interpretation
and application present questions of law that we decide
independently, while benefitting from the analyses of the court
of appeals and the circuit court. DeHart v. Wis. Mut. Ins. Co.,
2007 WI 91, ¶8, 302 Wis. 2d 564, 734 N.W.2d 394.
B. Statutory Interpretation
1. General principles
¶93 The purpose of statutory interpretation is to
determine the statute's meaning so that we can give the statute
its proper effect. Id., ¶12 (citing State ex rel Kalal v. Cir.
Ct. for Dane Cty., 2004 WI 58, ¶44, 271 Wis. 2d 633, 681 N.W.2d
110). We begin with the language chosen by the legislature.
Kalal, 271 Wis. 2d 633, ¶45. Statutory words are given their
plain and ordinary meaning unless they are technical terms or
have specific definitions within the statute. Id. If the
meaning of the statute is apparent from the plain meaning of the
words chosen by the legislature, we ordinarily stop our analysis
and apply that plain meaning to the questions presented for our
review. Id. We may use legislative history to confirm a plain
meaning interpretation. Id., ¶51.
3
No. 2015AP1530.pdr
2. Wisconsin Stat. § 103.465
¶94 We interpret and consider whether to apply Wis. Stat.
§ 103.465, which provides:
A covenant by an assistant, servant or agent not to
compete with his or her employer or principal during
the term of the employment or agency, or after the
termination of that employment or agency, within a
specified territory and during a specified time is
lawful and enforceable only if the restrictions
imposed are reasonably necessary for the protection of
the employer or principal. Any covenant, described in
this section, imposing an unreasonable restraint is
illegal, void and unenforceable even as to any part of
the covenant or performance that would be a reasonable
restraint.
¶95 The "covenant" addressed in Wis. Stat. § 103.465 is
the promise made by an "assistant, servant or agent" and is
limited in scope in that he or she promises "not to compete"
with "his or her employer" while employed by the employer or, in
specified circumstances, after that employment has ended. An
employee is an individual included within the statute's
protection of "servant." Romero v. West Bend Mut. Ins. Co.,
2016 WI App 59, ¶39, 371 Wis. 2d 478, 885 N.W.2d 591 (citing
Restatement (Second) of Agency § 220 cmt. g. (1958) ("explaining
that 'servant' and 'employee' are interchangeable terms")).
¶96 The statutory language is limited in regard to whom it
applies. That is, Wis. Stat. § 103.465 applies only to the
employee who signs a contract containing such a covenant and
"his or her employer." A plain reading of the statute shows
that the statute is not to be read as applying to a universe of
employers, but rather, it is directed at one particular
employer.
4
No. 2015AP1530.pdr
¶97 "To compete" is not defined within the statute.
Black's Law Dictionary defines competition as, "the struggle for
commercial advantage." Black's Law Dictionary 322 (9th ed.
2009). Accordingly, competition equates with those actions by
an employee that evince the struggle for commercial advantage of
the employee over his or her employer.
¶98 The statute also says that "any covenant described in
this section," i.e., a covenant by an employee not to compete
with his or her employer, that imposes an "unreasonable
restraint" is not enforceable. On whom do we focus to determine
if the covenant is an "unreasonable restraint?" Plainly, we
focus on the effect of the covenant on the employee because it
is the individual employee who made the promise to be restrained
in his or her actions.
¶99 It is important to note that the term "trade" is
nowhere to be found in Wis. Stat. § 103.465. Nor should it be
implied because the restraint that § 103.465 addresses is
plainly the restraint of the employee who signed the NSE
agreement. As I will explain in some detail below, it is not a
broad restraint of trade that is referenced in § 103.465, even
though some opinions casually incorporate that term.1
1
The court of appeals specifically interpreted the term
"restraint" in Wis. Stat. § 103.465 as restraining trade.
Manitowoc Company, Inc. v. Lanning, 2016 WI App 72, ¶14, 371
Wis. 2d 696, 885 N.W.2d 798. This interpretation goes far
beyond what a plain reading of the statute permits and creates a
universe of persons to which § 103.465 may be applied that is
much broader than that which the legislature created.
5
No. 2015AP1530.pdr
¶100 A restraint of trade is prohibited under the
provisions of Wisconsin Statutes ch. 133. A restraint of trade
has a broad focus. For example, Wis. Stat. § 133.01 is grounded
in a different scope of coverage and has a different analysis
for alleged violations than does Wis. Stat. § 103.465. Alleged
restraints of trade are examined under the "rule of reason,"
wherein Wisconsin courts follow federal court analyses of
alleged violations of section 1 of the Sherman Antitrust Act.
Indep. Milk Producers Co-op v. Stoffel, 102 Wis. 2d 1, 6-7, 298
N.W.2d 102 (Ct. App. 1980). Restraints of trade involve such
matters as monopolies, that inhibit competition, sometimes
vertically and sometimes horizontally, but on a broad basis.
See Olstad v. Microsoft Corp., 2005 WI 121, ¶¶13, 14, 284
Wis. 2d 224, 700 N.W.2d 139.
¶101 By inserting "restraint of trade" language into our
opinions, we have moved little by little away from Wis. Stat.
§ 103.465's plain meaning, which addresses only the restraint of
an employee. In so doing, we have incrementally broadened what
the legislature chose to regulate under § 103.465. We did so
with a casual reference to a broad doctrine, restraint of trade,
without reasoning whether § 103.465 actually proscribed a
restraint of trade or something more narrow.
¶102 For example, in 1959, in Lakeside Oil Co. v. Slutsky,
8 Wis. 2d 157, 98 N.W.2d 415 (1959), we were presented with an
injunction against a former employee that enforced a covenant
not to compete. Slutsky contended that the covenant was a
restraint of trade and therefore was illegal. Id. at 161. In
6
No. 2015AP1530.pdr
deciding whether the injunction was properly placed, we
evaluated the employment contract in light of controlling
statutes. We concluded, the "contract on its face is not
illegal." Id. The statute to which we referred when we
reviewed whether a "restraint of trade" had occurred was Wis.
Stat. § 133.01. Id. It was not Wis. Stat. § 103.465. However,
we noted later in the opinion that in 1957 the legislature had
enacted § 103.465. Id. at 161-62. We then went on to examine
the effect of the non-compete on the employer and employee, at
times drawing in antitrust concerns that are properly analyzed
under § 133.01, but not under § 103.465. Id. at 167.
¶103 In Behnke v. Hertz Corp., 70 Wis. 2d 818, 235 N.W.2d
690 (1975), we addressed a non-compete agreement that National
Car Rental required of its employee, Barbara Kreft. The
agreement provided:
I agree not to work for any car rental competitor in
the city of Milwaukee for one year if and when this
present job is terminated.
Id. at 820.
¶104 We began our discussion in Behnke by recognizing that
the contract provision at issue was controlled by Wis. Stat.
§ 103.465. Id. We then mused about various contract provisions
spoken to in Restatement (Second) Contracts, picking up
"restraint of trade" language from the Restatement. Id. at 821.
We did not discuss whether a restraint of trade was a broader
concept than a restraint of an employee; the question was never
presented.
7
No. 2015AP1530.pdr
¶105 In Zimmermann v. Brennan, 78 Wis. 2d 510, 254 N.W.2d
719 (1977), we examined whether a profit sharing plan provision
was unenforceable under Wis. Stat. § 103.465 when it provided
that Zimmermann would lose the unpaid portion of his vested
interest if he became employed by a "competitive business." Id.
at 512. Zimmermann alleged that "the forfeiture provision
contained in the plan constituted an unreasonable restraint of
trade under sec. 103.465, Stats.," using the broad "restraint of
trade" language found in earlier opinions. Id. Although the
trial court found the provision was an unreasonable restraint of
trade, we opined that we need not decide whether the trial
judge's conclusion was correct because the business that
Zimmermann engaged in subsequent to his employment by Brennan
was not a "competing business." Id. at 512-13.
¶106 In Strief v. Am. Family Mut. Ins. Co., 118 Wis. 2d
602, 348 N.W.2d 505 (1984), we concluded that a clause in an
insurance agent's contract was unenforceable under Wis. Stat.
§ 103.465 as "an unreasonable restraint of trade." Id. at 603-
04. However, the opinion actually turns on the interpretation
of the contractual provisions, not on an interpretation of the
scope of § 103.465. Id. at 611-12.
¶107 In Tatge v. Chambers & Owen, Inc., 219 Wis. 2d 99, 579
N.W.2d 217 (1998), we examined whether a wrongful discharge
claim would lie for the discharge of an at-will employee who
refused to sign a non-disclosure, non-compete agreement. Id. at
101. We assumed that the provisions sought to restrain
competition, and therefore, came within Wis. Stat. § 103.465.
8
No. 2015AP1530.pdr
Id. at 112. We reasoned that § 103.465 "evidences a strong
public policy against the enforcement of trade restraints which
are determined to be unreasonable upon all employees." Id. at
114-15.
¶108 Before concluding that no claim for wrongful discharge
could be made, we explained that "the validity of a restrictive
covenant is to be established by examination of the particular
circumstances which surround it." Id. at 116-17 (citing Rollins
Burdick Hunter of Wis., Inc. v. Hamilton, 101 Wis. 2d 460, 468,
304 N.W.2d 752 (1981) ("What is reasonable varies from case to
case, and what may be unreasonable in one instance may be very
reasonable in another.")).
¶109 In Heyde Cos., Inc. v. Dove Healthcare, LLC, 2002 WI
131, 258 Wis. 2d 28, 654 N.W.2d 830, we applied Wis. Stat.
§ 103.465 to a contract between two corporations. Id., ¶1. We
broadly stated the issue as: "whether a no-hire provision
contained in a contract between employers, without the knowledge
and consent of the affected employees, is unenforceable as an
unreasonable restraint of trade." Id., ¶9. This broad
statement of the issue permitted us to ignore the plain meaning
of § 103.465, which requires an employee covenant. However,
notwithstanding that little detail, i.e., the words the
legislature chose, we struck down the agreement between two
companies based on our expansion of § 103.465. Id., ¶13.
¶110 Star Direct, Inc. v. Dal Pra, 2009 WI 76, 319 Wis. 2d
274, 767 N.W.2d 898, is our most recent decision involving Wis.
Stat. § 103.465. Star Direct involved a business non-compete
9
No. 2015AP1530.pdr
clause and a customer non-compete clause in Dal Pra's employment
contract with Star Direct. We applied § 103.465 to both
clauses. Id., ¶5. No question was raised about the
applicability of § 103.465 to these clauses.
¶111 We started our analysis with the now common, broad
statement: "Restrictive covenants in Wisconsin are prima facie
suspect as restraints of trade." Id., ¶19. (citing Streiff, 118
Wis. 2d at 611). However, we did not expand our analysis
consistent with that broad statement as we had in Heyde, but
instead, we narrowly focused on the particular facts and
circumstances of Star Direct and Dal Pra. We recognized the
legitimate concerns of an employer when a former employee is in
possession of confidential business information. Id., ¶47.
¶112 Equity Enterprises, Inc. v. Milosch, 2001 WI App 186,
274 Wis. 2d 172, 633 N.W.2d 632, contained a contract with a NSE
clause. However, the court of appeals did not address whether
Wis. Stat. § 103.465 applied to NSE clauses or whether it was
relevant to Milosch's claim for commissions that he asserted
Equity was retaining.
¶113 In Mut. Serv. Cas. Ins. Co. v. Brass, 2001 WI App 92,
242 Wis. 2d 733, 625 N.W.2d 648, the court of appeals in meeting
MSI's concern that Brass's new employer, American National Ins.
Co., had raided the ranks of its career agents, reasoned that
NSE provisions do not come within Wis. Stat. § 103.465. Id.,
¶17. The court of appeals said that "[t]he law [§ 103.465],
however, does not protect against the raiding of a competitor's
employees. Rather, it encourages the mobility of workers." Id.
10
No. 2015AP1530.pdr
In so concluding, the court of appeals affirmed that § 103.465
is focused on covenants that preclude the employee from
realizing employment opportunities, but that it does not apply
to all agreements that employees make with their employers.
¶114 Few states have examined NSE provisions in employment
contracts. However, a provision similar to the NSE covenant at
issue here was addressed in CDI Corp. v. Hough, 9 So. 3d 282(La. Ct. App. 1 Cir. 3/27/09). Hough was a vice-president of
operations for CDI. In connection with his employment he signed
a NSE agreement that provided:
For a period of twelve (12) months following the
termination of your employment with the Company, you
will not:
(a) Directly or indirectly hire or cause to be hired,
or solicit, interfere with or attempt to entice
away from the Company, any individual who was an
employee of the Company within six (6) months
prior to such contact, solicitation, interference
or enticement.
Id. at 284.
¶115 Hough and Kyzer, another employee of CDI, decided to
set up a competing business. They did so and then recruited
several CDI employees to go to work for their new company. Id.
at 285.
¶116 CDI sought and obtained an injunction prohibiting
further raiding of CDI employees. On appeal, Hough challenged
the injunction, claiming that it violated a Louisiana statute
that regulated non-compete agreements between employees and
employers. Id. at 286.
11
No. 2015AP1530.pdr
¶117 The court noted that generally parties contract as
they see fit, and courts "will enforce the contract as written,
provided the agreement is not contrary to good morals or public
policy." Id. at 287. The court then noted that the purpose of
the Louisiana statute was to avoid restraints on an employee's
employment opportunities, which is not a concern of an agreement
not to solicit an employer's employees. Id. at 290.
¶118 The court concluded that the NSE agreement "does not
prevent Mr. Hough from exercising his trade, profession, or
business. In fact, the agreement assumes Mr. Hough will compete
with CDI Corporation." Id. at 292. The court then concluded
that the NSE agreement Hough signed with CDI is not governed by
the statute raised by Hough and is enforceable. Id.C. The NSE Agreement
¶119 As I consider whether the NSE agreement at issue here
comes within the provisions of Wis. Stat. § 103.465, I note how
the statute expresses its concerns for employees. Section
103.465 plainly focuses on contractual promises of an employee
"not to compete with his or her employer." The language chosen
by the legislature is driven by a legislative policy choice that
employees not be subjected to undue restraints on their
employability or mobility. Streiff, 118 Wis. 2d at 614.
Covenants that the employee not work for a competitor, supplier
or customer of his or her employer come within covenants not to
compete with the employee's employer.
¶120 However, Wis. Stat. § 103.465 also considers the
interests of employers and their necessary business interests.
12
No. 2015AP1530.pdr
For example, § 103.465 does permit employers to contract for
restrictions that would limit their employees employment
opportunities if the restriction is reasonable in time and place
and reasonably necessary to protect a business interest of the
employer. Rollins Burdick, 101 Wis. 2d at 469.
¶121 Lanning's contract with Manitowoc provides: "IN
CONSIDERATION OF BEING GIVEN ACCESS TO CONFIDENTIAL INFORMATION,
I AGREE TO ALL OF THE FOLLOWING:." The NSE clause follows. In
the contract, Lanning agreed that during his employment, and for
two years thereafter, he will not try to persuade other
employees of Manitowoc to leave Manitowoc or to accept
employment with a competitor, supplier or customer of Manitowoc.
¶122 On its face, the NSE clause protects against only the
raiding of Manitowoc's key employees by Lanning, who was given
access to Manitowoc's confidential information. It does not
prevent Lanning from competing with Manitowoc. He can work for
whomever he chooses, including a direct competitor such as SANY,
in any place, at any time. He can use all the engineering
skills he possesses. He can contact customers of Manitowoc in
an attempt to sell or service more cranes. Furthermore, the NSE
clause does not prevent Manitowoc's other employees from leaving
Manitowoc for other employment opportunities, including working
for a competitor such as SANY. The NSE clause simply restrains
Lanning from raiding Manitowoc's skilled employees.
¶123 I agree with the court of appeals in Brass; Wis. Stat.
§ 103.465 "does not protect against the raiding of a
competitor's employees." That concern is not within the purview
13
No. 2015AP1530.pdr
of § 103.465. Stated otherwise, the NSE covenant does not come
within the provisions of § 103.465 because it is not a covenant
that prohibits Lanning from competing with Manitowoc.
¶124 Lanning does not question that there was consideration
for the contract he signed. Courts generally honor the rights
of parties to freely contract. Solowicz v. Forward Geneva Nat.,
LLC, 2010 WI 20, ¶34, 323 Wis. 2d 556, 780 N.W.2d 111.
Accordingly, I would honor the right to freely contract and
enforce the agreement Lanning made.
D. Lead opinion
¶125 The lead opinion gets off track by asserting that Wis.
Stat. § 103.465 applies to "agreements viewed as restraints of
trade."2 It cites Heyde for this proposition, and as I explained
above, Heyde dealt with an agreement between two companies. See
also Heyde, 258 Wis. 2d at 47 (Sykes, J., dissenting) ("The
majority analyzes this case as though it were a lawsuit between
an employer and a former employee, but it is not. It is a breach
of contract lawsuit between two sophisticated businesses.").
¶126 The lead opinion herein creates an even broader
application of Wis. Stat. § 103.465 than that created by Heyde.
The lead opinion states, "§ 103.465 'essentially deals with
restraint of trade . . . regardless of whether the restriction
is labeled a non-disclosure provision or a covenant not to
compete.'"3 The lead concludes the NSE clause violates § 103.465
2
Lead op., ¶5.
3
Id., ¶6.
14
No. 2015AP1530.pdr
because it "affects access to the labor pool by a competitor of
Manitowoc Company (including Lanning's current employer, SANY
America)."4 By that addition, the lead includes the effect of
the NSE on non-parties to the contract. Essentially, the lead
legislates new parameters for § 103.465 that are far beyond what
the plain meaning of the statute can accommodate. In so doing,
it sets the stage for greater and greater judicial legislating.
¶127 As I explained above, using "restraint of trade" as
definitional for Wis. Stat. § 103.465, creates a much broader
regulation than that chosen by the plain meaning of § 103.465,
wherein "trade" is never mentioned. Using restraint of trade as
the matter being regulated has permitted the Wisconsin Supreme
Court to find a violation of § 103.465 in a contract between two
companies, where no employee was involved. Heyde, 258 Wis. 2d
at 47.
¶128 Although "restraint of trade" is a term found in many
opinions, it initially was employed when a restraint of trade,
i.e., a violation of Wis. Stat. § 133.01, was claimed. Lakeside
Oil, 8 Wis. 2d at 158-59. While many cases repeat the words,
few expand Wis. Stat. § 103.465 with them as Heyde did and as
the lead opinion does here.
¶129 Employers will be harmed by the lead opinion's
expansive interpretation of Wis. Stat. § 103.465 because
employers will be unable to prevent raiding of their key
employees by a former employee who knows which employees are
4
Id., ¶9.
15
No. 2015AP1530.pdr
important to the former employer's operations. When such an
employee joins an aggressive competitor, competition in the
marketplace will be diminished because the former employer will
become a less effective competitor than it was before its key
employees were raided.
III. CONCLUSION
¶130 The lead opinion distorts the plain meaning of Wis.
Stat. § 103.465, thereby changing it from a statute that
balanced the rights of employees and their employers into a
broad mandate that prevents employers from protecting their
businesses from third-party raiding. In so doing, it permits
Lanning to assist SANY in cherry picking Manitowoc's key
employees and thereby reduces the competition that Manitowoc
would otherwise be able to exert against SANY as both compete in
the same marketplace.
¶131 Because I conclude that the NSE clause in Lanning's
employment contract with Manitowoc does not come within the
plain meaning of Wis Stat. § 103.465 and is enforceable, I
respectfully dissent.
¶132 I am authorized to state that Justice ANNETTE
KINGSLAND ZIEGLER joins this dissent.
16
No. 2015AP1530.pdr
1