Wisconsin Business and Commercial Litigation

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.

On June 12, 2009, Milwaukee County Judge Thomas Cooper concluded that the City of Milwaukee’s sick leave ordinance was both improperly enacted and an unconstitutional exercise of the City’s police powers.  The Journal-Sentinel more completely summarizes the decision and order.  The legal deficiencies identified by the court are fairly easily remedied, so even if the decision holds up on appeal, the legislation is likely to re-appear in the next couple of years.  The decision itself is worth a look, a little formulaic, but exhaustive and well-researched.  I can’t find the decision itself online yet.  When I do, I’ll try to post a link.

In a recent, but unpublished, decision, the court of appeals interpreted the language of a contract that set a formula for calculating a bonus for a sales employee.  The dispute centered on the following contract term:

The Company will be the sole and final arbitrator with respect to interpretations and application of all aspects of this Plan including, but not limited to the amount of commission and/or bonus due any plan participant.

The company argued that the “sole and final arbitrator” phrase permitted it discretion in determining the amount to paid to the employee, despite the formulas established in the contract.  The employee agreed that the company reserved discretion, but argued that it exercised it unreasonably.  The court, however, disagreed with everyone: 

This language does not convey general discretion, limited or absolute, to determine a bonus amount. Rather, it states that if a dispute arises over the meaning of an agreed upon formula, CNH will be the final arbitrator of that dispute.

The decision is a fairly well-supported, if very literal, interpretation of the specific language.  However, it’s certainly worth reading, particularly if your company uses bonus contracts that attempt to reserve discretion in the calculation.  Take care with your language, and say what you want to say.  While contracts can never be written to cover every contingency, it’s best to get a few eyes on the language before you make any big decisions. 

The most tragic part of this case, from the clients’ points of view, is that the roughly $30,000 dispute ended up in the court of appeals.

S.B.20, passed by the Wisconsin legislature in Madison and sent to Governor Doyle for his signature, ratchets up the cost of discrimination on employers.  Under current statutes, an employer can be required to reinstate a discriminated-against employee, pay back pay, and cover the successful claimant’s attorney’s fees. 

The new bill would, in addition, permit the employee or the Department of Workforce to sue in circuit court to recover compensatory and punitive damages caused by the discrimination.  And as the cherry on top, an employer found liable would pay an additional 10% surcharge, based on the total amount of compensatory and punitive damages, into the circuit court.  According to the bill, this additional penalty would be used to further enforce the so-called Fair Employment Law.

As of this writing, Doyle hadn’t signed the bill yet, nor had his office indicated his intent.  Honestly, though, does anyone really think that Doyle won’t sign this?