My firm regularly publishes an employment law update, filled with summaries of the latest cases. Have a look at the most recent edition:
http://www.hinshawlaw.com/employment-practices-alert-05-03-2010/#Employer
A new bill in the Wisconsin Legislature would make employers liable for “workplace bullying.” Jack Zemlicka of the Wisconsin Law Journal describes the legislation:
Currently, workers’ compensation is typically the exclusive remedy for an employee with a claim against an employer. But Assembly Bill 894 provides that an employee can sue over an abusive work environment and potentially recover medical expenses, back pay, front pay, compensation for emotional distress, punitive damages and attorney fees.
This bill even has its own website, which describes the bill as part of a “movement.” Thankfully, none of the states to which the “movement” has spread have gone so far as to accept the proposal.
Since 2003, 17 states have introduced similar proposals, but none have passed, according to the office of Rep. Kelda Roys, a sponsor of the Wisconsin legislation.
If you’re an employer, keep your eyes on this one. This could be full-time employment for plaintiff and defense lawyers alike.
Argument image courtesy Francis Carnauba’s flickr gallery through this creative commons license.
In Gillitzer v. Andersen, the court of appeals once again addressed the divisibility of various employment-related covenants. Employees signed a contract agreeing that: 1) if the employer paid for their electric apprenticeship training, and the employee left the company’s employ within four years, the employee would repay the training costs; and 2) the employee would, for four years after leaving the company, not solicit present or past customers, employees, or disclose price or customer lists. The employee defendants, of course, left before the four years was up and Gillitzer wanted its money back.
The employees claimed that the unreasonable non-compete provision, under Streiff v. American Family Mutual Insurance Co., 118 Wis. 2d 602, 348 N.W.2d 505 (1984), was indivisible from the admittedly reasonable repayment provision, and should therefore be struck down. Gillitzer claimed that admittedly unreasonable non-compete provision, under Star Direct, Inc. v. Dal Pra, 2009 WI 76, 319 Wis. 2d 274, 767 N.W.2d 898, was divisible from the reasonable and enforceable repayment provision.
The court ducked the decision, finding the provisions divisible under both cases:
Both cases describe the divisibility test in terms of whether the provisions must be read together to determine the meaning of either. See Streiff, 118 Wis. 2d at 612; Star Direct, 319 Wis. 2d 274, ¶78. Both acknowledge the fact-intensive nature of the divisibility analysis. See id. We do not decide, because it is not essential to our resolution of this appeal, whether the Star Direct test for divisibility is new and different from the test set forth in Streiff. We conclude that under the court’s language in either Streiff or Star Direct, the training reimbursement provision is divisible from the non-compete provision.
Whether viewed under the Streiff or Star Direct language, the training reimbursement provision here is clearly divisible from the non-compete clauses.
For those involved in drafting, enforcing, or challenging non-compete or comparable provisions, take note of the court’s comments about both Streiff and Star Direct.
Contract picture courtesy ol slambert flickr gallery under this creative commons license.
In Cape & Sons v. Streu Construction (Sept. 9, 2009), the District II Court of Appeals addressed a creative twist on employer liability for employee actions. Cape sued Beaudoin, one of Cape’s employees, and two other companies that colluded with Beaudoin in a bid-rigging scheme that allocated bids to each of the three companies in turn. The defendants argued that the doctrine of respondeat superior (which imputes an employee’s actions within the scope of its employment to its employer) applied to constructively make Cape & Sons part of the bid-rigging process, thereby preventing liability (although the scheme was one of the reasons that Cape & Sons eventually sought bankruptcy protection).
To reverse the trial court’s conclusion that the doctrine applied and prevented Cape & Sons from recovering, the appellate court dusted off an 1866 case (Zulkee v. Wing, 20 Wis. 429) in which the Supreme Court concluded that respondeat superior applies “only as between the master or principal and third persons,” and was not applicable in a suit between an employer and employee.
Cape & Sons victory was not the only September 9 setback for the corporate defendants, who also lost the coverage fight with their insurance companies, leaving payments of about $1.15 million on the table. This second decision is an important lesson for plaintiffs that the language of the complaint is crucial to triggering coverage for defense and/or indemnity purposes.
As most of you know, if you’ve read my previous postings (see June 12, 2009), the City of Milwaukee passed, through so-called direct legislation, an ordinance requiring employers to provide paid sick leave for all workers. The legislation was later found unconstitutional because, among other things, the phrasing of the issue on the ballot was overly vague.
Proponents of the legislation appealed the ruling. Last week, the City of Milwaukee announced that it was not joining in the appeal. Naturally, the private groups supporting the legislation and the appeal (in all other instances known as special interest groups) argue that by not joining the appeal, the City is turning its back on all those who voted in favor of the legislation.
This argument ignores the finding of the court that the phrasing of the issue on the ballot left the voters without a real understanding of what they were voting on. However illogical, the argument is typical of that used to support this and similar issues that require business owners (including stockholders) to subsidize services provided to the community at large.
This article in the Wisconsin Law Journal discusses the issues in greater detail.
In Maypark v. Securitas Security Services USA, Inc. (Sep. 1, 2009), the District III court of appeals was presented with a unique (to be charitable) fact pattern. Security Manager Schmidt, employed by Securitas, which was the security services subcontrator for Polaris, was responsible for creating photo ID badges for Polaris employees. One lonely night, Schmidt copied the photographs of about thirty female Polaris employees, took them home, printed them out, ejaculated on them, and posted pictures of the sullied photos on a number of websites.
Upon learning of the website contents, Polaris notified Securitas, which immediately terminated Schmidt’s employment. Schmidt removed the offending photos from the websites. Nevertheless, at a trial brought by ten of the women in the pictures, Securitas was found liable for negligent training and supervision.
District III confessed some confusion arising from recent Supreme Court precedent:
However, given recent guidance from our supreme court, it is unclear how we are to set forth our analysis. Depending on the cases we review, we should either (1) evaluate whether Securitas had a duty under the circumstances of this case, see Hocking v. City of Dodgeville, 2009 WI 70, PP10-13 . . . , or (2) consider whether Securitas’s actions constituted a breach of the duty of ordinary care, see Behrendt v. Gulf Underwriters Insurance Co, 2009 WI 71, PP15-31 . . . .
Ultimately, the court determined that its confusion didn’t really prevent a reasoned conclusion.
We conclude it does not matter which approach we employ because, in the end, they are one and the same. A conclusion of no negligence under the first approach requires that we determine the defendant was not required to act, while under the second it requires that we determine there was no breach for failing to act because the defendant was not required to act. . . . Without explicitly employing either approach in this case, we simply conclude Securitas was not negligent, as a matter of law.
The court ended up relying on another negligent supervision case to determine that Schmidt’s acts were, in something of a judicial understatement, not reasonably foreseeable. Maypark should bring some comfort to employers who fret about the seemingly endless limits of their liability for the acts of employees.
Brilliance Business Solutions, Milwaukee-based website design and search engine optimization firm, has invited me to post on the Brilliance blog. I will briefly discuss the use of social networking sites by lawyers and employers. The information that’s available on any one person has multiplied astronomically in the last few years.
Some information is put out on the web in first-person format (facebook, myspace, etc.) and some is put out there by others (check out Sorry I Missed Your Party and the facebook open group 30 Reasons Girls Should Call It a Night ). Regardless of how it gets there, the information can come back to haunt you.
These sorts of sites provide fertile ground for lawyers seeking to obtain information about a plaintiff or witness. Employers doing due diligence before hiring may run across all sorts of things that should not impact the hiring decision, but why take the chance? That applies equally to either – it’s no good for the potential employee, and creates the possibility of litigation for an employer who misuses the information.
For lawyers, doing a quick search on the deponent or party is always a good idea. You never know what might be behind the next mouse click.
The Wisconsin Supreme Court recently (July 14, 2009) undertook to analyze non-compete and confidentiality agreements between an employee and employer. In Star Direct v. Dal Pra, the court considered claims that Dal Pra violated various provisions of his agreement by, after voluntarily terminating his employment with Star Direct, starting his own competing business servicing Star Direct’s customers.
The Court addressed each of the three contract clauses at issue, beginning with the “customer clause,” and focusing on Star Direct’s interests in prohibiting competition:
The customer clause prohibits Dal Pra, for 24 months following termination, from interfering with or endeavoring to entice away a person or entity “which is a customer” or “which was a customer . . . within a period of time of one year prior to . . . termination.” The clause further specifies that prohibited customers are those “for which Employee performed services or otherwise dealt with” or “obtained special knowledge” about in the course of employment. The provision also prohibits Dal Pra from approaching “any such customer or past customer” for prohibited purposes or cooperating with others toward that end.
Addressing an issue not previously directly decided, the Court approved of the customer clause’s application to past customers of Star Direct. In reaching its decision, the Court relied primarily on the idea that Dal Pra would have a significant advantage in competing for those past customers because of his special knowledge of Star Direct’s business and of the customers themselves. Moreover, the Court pointed to the nature of the business itself as support for this decision and for its conclusion that Star Direct had an interest in protecting customers with whom Dal Pra had not recently contacted.
The court turned next to the “business clause:”
[F]or a period of twenty-four (24) months after termination of Employee’s employment with Employer, Employee shall not, directly or indirectly . . . become engaged in any business which is substantially similar to or in competition with the business of the Employer, within a fifty (50) mile radius of Rockford, Illinois.
The Court concluded that the business clause’s restriction on engaging in a “substantially similar” business was overbroad and not reasonably necessary to protect Star Direct:
The lack of any protectable interest means the business clause is unreasonable and unenforceable.
Finally, the Court turned to the “confidentiality clause:”
The confidentiality clause bars Dal Pra, for 24 months following his termination, from using or disclosing “any information or knowledge, known, disclosed or otherwise obtained by him during his employment by Employer or CB Distributors.” It then lists a variety of specific information that is to be deemed confidential and protected, including but not limited to knowledge “conceived, discovered or developed by Employee or CB Distributors,” “proprietary products or procedures,” trade secrets, customer lists, “marketing techniques which are not generally known in the business community, and which relate to the business of the Employer or CB Distributors or are in the nature of trade or business secrets,” mailing lists, and special pricing information.
Again, the court focused on whether the clause was necessary to protect Star Direct. Because it concluded that the information protected was proprietary, it determined that the clause was reasonably necessary. Finally, the court addressed divisibility of restrictive covenants in general, and particularly those above.
If you haven’t read it, and you or your company uses restrictive covenants, click the link and get going.
In Behrendt v. Silvan Industries, Inc. , opinion filed July 9, 2009, the Wisconsin Supreme Court addressed a question that plagues many manufacturing and service provider employers: What is the employer’s liability for side jobs performed by its employees using company equipment? The answer (not as clear as you might like):
In order for an employer to be vicariously liable for an employee’s act, the act must have been within the scope of employment. We agree with the court of appeals that summary judgment is appropriate on the claim of vicarious liability because the only evidence presented was that the tank was a side project that was completed for the employee’s own purpose and thus was outside the scope of employment.
The plaintiff’s argument that permitting side jobs raised employee morale did not persuade the court.
In the lengthiest portion of the decision, the court emphasized that the employer bore the duty that all Wisconsin residents bear to exercise care to prevent creating an unreasonable risk of injury to another. However, it also concluded that the injury here, caused when a tank, originally built as a side job by a Silvan employee and later modified, exploded, was not a reasonably foreseeable risk. The court’s language is worth a look by any employer whose employees occasionally take on side jobs.
However, we then look at whether Silvan breached that duty by failing to exercise the care a reasonable person would use in similar circumstances. In most cases, whether a defendant breached a duty is a question of fact that is submitted to the jury and thus is not appropriate for summary judgment. In this case, however, it is the lack of foreseeable risk that convinces us, as a matter of law, that Silvan cannot be said to have failed to exercise ordinary care with regard to its policy on side jobs. Further, there is no material fact in dispute as to Silvan’s policies about side jobs and its prohibition on employees making pressurized vessels as side jobs for personal use. There is in addition uncontroverted evidence in the record that Silvan took steps such as having holes cut into any tanks that were considered as scrap—-as well as testimony of the tank’s owner that this tank itself originally had holes in it—-and that the point of cutting holes into the tanks was to keep them from being used with air pressure. Summary judgment is appropriate on the negligence claim because under these circumstances Silvan did not breach its duty to act with ordinary care.
Once again, Northwestern Mutual Life is being sued by former representatives seeking overtime and wage pay protections under federal and state law. The Milwaukee Business Journal article gives a more-detailed rundown of the current California-venued case and the history of this kind of claim against NML.
This kind of litigation is fairly common to organizations with large commissioned sales forces. The challenge for these employers is to structure the relationships with an eye toward the various regulations by multiple layers of government.
