Wisconsin Business and Commercial Litigation

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.

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.

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.