Monthly Archives: January 2018

Employers Who Utilize Temporary Or Loaned Employees Are Now Potentially Liable For Third Party Claims Brought By An Injured Employee

By: Daniel Pedriana, Joseph Birdsall and Claudia Harke

On January 9, 2018, District III of the Wisconsin Court of Appeals decided that Wis. Stat. § 102.29(6)(b)1 allows an injured temporary employee to choose between filing a worker’s compensation claim and suing the temporary employer for tort damages.

In Rivera v. West Bend Mutual, Carlos Rivera and two other individuals died in a single-vehicle accident. Rivera was survived by five children, two of whom were minors at the time of his death. At the time of the accident, Rivera was a passenger in a vehicle owned by Alpine and insured by West Bend. Rivera was employed by Alex Drywall, which, in turn, had provided him to perform work for Alpine. Alpine paid Alex Drywall for Rivera’s services and Alex Drywall paid Rivera for his work.

In February 2016, Rivera’s two minor children and the special administrator of Rivera’s estate commenced a wrongful death lawsuit against Alpine and West Bend. The Estate had not filed a claim for worker’s compensation under the Act. A Milwaukee County Circuit court judge granted summary judgment for Alpine and West Bend, concluding that because Rivera was an employee of a temporary help agency (Alex Drywall), the Estate was prohibited from bringing a tort action against Alpine.

On appeal, the Wisconsin Court of Appeals reversed the circuit court, ruling that the exclusive remedy provision of the Worker’s Compensation Act does not bar a temporary employee from bringing tort claims against a third party. The Court found that Alex Drywall was Rivera’s employer, and therefore, the exclusive remedy provision prohibited the Estate from bringing a tort claim against Alex Drywall, but it did not prohibit the Estate from pursuing tort claims against Alpine and West Bend, which the Court found to be third parties in this case.

The Court concluded that Wis. Stat. § 102.29(6)(b)1 only bars tort claims from temporary employees who make claims for worker’s compensation. In this case, it was undisputed that the Estate had not made a worker’s compensation claim. As a result, the Estate was not barred from pursuing tort claims against Alpine and West Bend—the temporary employer and its insurer. The Estate was still barred from suing Rivera’s primary employer, Alex Drywall, which the Court treated as a temporary help agency in this case.

The Rivera decision is significant because it exposes certain Wisconsin employers to tort liability that they were previously sheltered from. Under the Decision, if a temporary employee is injured, the temporary employee may pursue tort claims against the employer that they are placed with or they may file a worker’s compensation claim against their primary employer—the temporary employment agency.

Employers who compensate temporary employment agencies for the services of employees primarily employed by the temporary help agencies should be concerned about tort liability in the event of an injury. Even if other employers do not advertise themselves as temporary help agencies, they may fit the definition of temporary help agency under the statute like Alex Drywall did in the Rivera decision. Furthermore, the Rivera decision indicates that loaned employees under Wis. Stat. §102.29(7) produce the same tort liability as temporary employees who are primarily employed by a temporary help agency.

This decision is currently unpublished, but was recommended for publication by the Third District of the Wisconsin Court of Appeals. The parties have 30 days to file a petition for review to the Wisconsin Supreme Court. This 30 day period will expire on February 8, 2018. As of January 24, 2018, no petition has been filed.

If you have questions about this material, please contact Daniel M. Pedriana (dpedriana@lindner-marsack.com), Claudia R. Harke (charke@lindner-marsack.com), or Joseph D. Birdsall (jbirdsall@lindner-marsack.com) or any other Lindner & Marsack, S.C. attorney.

Wisconsin Supreme Court Declares that Non-Solicitation of Employee Provisions are Governed by the Same Wisconsin Statute that Addresses Non-Compete Provisions

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By Oyvind Wistrom

The Wisconsin Supreme Court issued a landmark decision on Friday in the case of The Manitowoc Company, Inc. v. John Lanning, 2018 WI 6. The case represented the Court’s first opportunity to determine whether a Non-Solicitation of Employee (NSE) provision in a contract between an employer and an employee is governed by the same statute, Wis. Stat. § 103.465, that governs the enforceability of non-compete restrictive covenants. The majority of the Court concluded that NSE provisions are indeed governed by Wis. Stat. § 103.465, and then proceeded to find the NSE at issue overbroad and unenforceable because it restricted Lanning’s ability to engage in ordinary competition attendant to the free market.

The case involved the interpretation of a NSE provision signed by Lanning while he was previously employed by The Manitowoc Company, which prohibited him, for a period of two years following the termination of his employment, from soliciting, inducing or encouraging any employee of The Manitowoc Company to terminate his/her employment with The Manitowoc Company or to accept employment with a competitor, supplier or customer of The Manitowoc Company. After separating from The Manitowoc Company, Lanning accepted employment with SANY, a competitor of The Manitowoc Company’s crane division. It was alleged that he subsequently engaged in recruitment efforts in which he encouraged employees of The Manitowoc Company to accept employment with SANY.

The Circuit Court initially ruled in favor of The Manitowoc Company and awarded damages related to the alleged breach. The Wisconsin Court of Appeals reversed and ruled in favor of Lanning, finding the NSE provision unenforceable under Wis. Stat. § 103.465 because it was broader than reasonably necessary to protect a legitimate business interest of The Manitowoc Company. Specifically, the NSE was overbroad because it restricted Lanning from encouraging as many as 13,000 employees of The Manitowoc Company, many of whom worked in a different division of the company and with whom Lanning had no contact, to terminate their employment with The Manitowoc Company.

The majority of the Justices on the Wisconsin Supreme Court agreed and affirmed the decision of the Court of Appeals. In so doing, the Court first concluded that Wis. Stat. § 103.465 governed the enforceability of NSE provisions. The Court thus clarified that in order for a NSE provision to be enforceable under Wisconsin law, it must be (1) reasonably necessary for the protection of the employer; (2) provide a reasonable time period; (3) provide a reasonable territorial limit; (4) not be harsh or oppressive as to the employee; and (5) not be contrary to public policy. The lead opinion of the Court concluded that the NSE at issue was not reasonably necessary to protect a legitimate interest of The Manitowoc Company. In particular, as the restriction was worded, it prevented Lanning from encouraging any Manitowoc Company employee, no matter the employee’s job or location, to terminate his or her employment with Manitowoc for any reason, or soliciting any Manitowoc Company employee to take any position with any competitor, supplier or customer of The Manitowoc Company. Without a specified territory or class of employees, the provision restricted Lanning’s conduct with respect to all employees of The Manitowoc Company everywhere. The restriction was simply too broad for the Court to enforce.

The primary lesson to be learned from this case is that in order for a Non-Solicitation of Employee provision to be enforceable under Wisconsin law, the provision must be narrowly tailored to protect a legitimate business interest. An employer does not have a protectable interest in restricting competition of the type that an ordinary stranger can provide. For instance, while The Manitowoc Company’s NSE was extremely broad, a NSE that, for example, only prevents the recruitment or poaching of key employees with whom a former employee had contact for a specified period of time, may still be enforceable under Wisconsin law. Even such a restriction must still be drafted in such a way as to ensure it satisfies all five statutory requirements outlined above. Employers who utilize NSE provisions should review these provisions carefully with legal counsel to ensure they are compliant and enforceable under Wisconsin law.

For further information, or assistance in drafting or reviewing your restrictive covenants, please contact Attorney Oyvind Wistrom at (414) 273-3910 or via email at owistrom@lindner-marsack.com. Mr. Wistrom was lead counsel in The Manitowoc Company case and successfully argued the case before the Wisconsin Supreme Court.

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