STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)


THOMAS C MICHELSON, Employe

N/C SERVICES INC, Employer

UNEMPLOYMENT INSURANCE DECISION
Hearing No. 99606417MW


An administrative law judge (ALJ) for the Division of Unemployment Insurance of the Department of Workforce Development issued a decision in this matter. A timely petition for review was filed.

The commission has considered the petition and the positions of the parties, and it has reviewed the evidence submitted to the ALJ. Based on its review, the commission makes the following:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

The employe worked for about seven years as a salesman for the employer, a company involved with the sale of machine tools. The employe's last day of work was July 26, 1999 (week 31).

The issue which must be decided is whether the employe quit or was discharged. If the employe quit, a secondary issue is whether the employe's quitting was for any reason that would permit the immediate payment of unemployment benefits. If the employe was discharged, a secondary issue is whether the employe's discharge was for misconduct connected with his employment.

The employe worked as a salesman on a straight commission basis. The employer and employe had agreed that the employe would begin working out of his home beginning in August of 1999.

The employer wanted the employe to sign an agreement which set forth the terms of the employment relationship, prior to the time the employe would start working out of his home. Until then, the terms had been strictly verbal. The employe quit his employment with the employer because he objected to some of the terms in the agreement. He could have continued working for the employer had he signed the statement, which the employer made a condition of continued employment. By not signing the agreement, the employe ended the employment relationship. It must be concluded that the employe quit and was not discharged from his position.

In some cases, the contract simply memorialized the existing relationship between the two parties. In terms of compensation, for instance, the contract called for "1/3 of the profit margin" as compensation. This was the same arrangement that the parties had before the employe was asked to sign the contract.

The employe objected to the provisions which required approval for business expenses. The only expenses the employe typically incurred were mileage and an occasional lunch expense with a client. The employe averaged about two lunches per year with clients. Neither his mileage nor his lunch expense had ever been questioned in the past. The employer did, however, deny approval for a previous out-of-state conference that the employe had asked to attend.

The employe also objected to the "non-compete" clause in the contract.

Wis. Stat. § 103.465 provides:

"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 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 guiding principle in determining whether the employe is eligible for benefits because he or she refused to sign such agreement is whether the agreement is reasonable. Strange Paperboard Div. Of the Menasha Corp. v. DILHR and Pardee, Circuit Court Case No. 134-236, July 20, 1972.

In Magne-Script of Madison, Inc. v. DILHR, LIRC, Bohne and Bruckbauer Dane County Circuit Court Case No. 86-CV-1351 (February 2, 1988), the commission found, and the court agreed, that the employes had quit for good cause because the non-compete agreement, which basically provided that for two years after separation the employes could not be connected with any business within Dane County which provides videotape services doing business in Dane County, was unreasonable. See also Jean E Sternemann v. Graphic Resources Inc. (Commission Decision, October 23, 1990).

The agreement in the present case prohibits the employe from owning, managing, operating controlling, consulting to or being employed by any business substantially competitive to the company, for a year and within a 150 mile radius of the employer. In the first place, substantially competitive to the employer is vague. Further, the agreement attempts to prohibit competition. This limits the employe's ability to find work in his field should the employment relationship end, because he cannot be employed by another business which sells machine tools, or possibly tools of any sort, whatever the employer believes would be substantially competitive. The ALJ's finding that the employe did not intend to immediately sell for another company in the near future assumes that the employment relationship between the parties would continue. However, if the employe was discharged or quit after signing the non-compete agreement, he would be precluded from finding work in his area of experience, unless he was willing to move or work a considerable distance from the employer's location. This non-compete agreement had the potential to be oppressive if the employment relationship between the parties ended and the employe needed to seek future employment. The employer did not explain why the non-compete agreement was necessary, in particular as the employe had worked for this employer for seven years without a non-compete agreement. In addition, the employe was pressured to sign the agreement immediately, without being given the opportunity to think it over. The employer's actions were unreasonable and as such, the employe had good cause attributable to the employer for quitting.

The commission therefore finds that in week 31 of 1999, the employe terminated his work with good cause attributable to the employing unit, within the meaning of Wis. Stat. § 108.04(7)(b).

DECISION

The decision of the administrative law judge is reversed. Accordingly, benefits are allowed as of week 31 of 1999, if the employe is otherwise qualified.

Dated and mailed December 22, 1999
micheth.urr : 145 : 1 VL 1005 VL 1080.05

/s/ David B. Falstad, Chairman

/s/ Pamela I. Anderson, Commissioner

/s/ James A. Rutkowski, Commissioner

MEMORANDUM OPINION

The commission did not discuss witness credibility and demeanor with the ALJ prior to reversing his decision. The commission reverses the ALJ's decision because it reached a different legal conclusion when applying the law to the facts found by the ALJ.


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