Often in cases involving restrictive covenants and sometimes in cases in which there is no restrictive covenant, an employer will bring a claim that a former employee breached his/her duty of loyalty by engaging in competitive activities when he/she was still employed by the employer. Indeed, in the absence of a restrictive covenant, a claim that a former employee breached his/her duty of loyalty is likely to be one of the principal claims raised in such a case. Wisconsin cases addressing such claims in the employment context have differentiated between “key employees” who have a duty of loyalty to their employers and other employees who do not have such a duty. However, a recent decision by the Wisconsin Court of Appeals – Infocorp, LLC v. Hunt, __ N.W.2d __, No. 2007 AP 2887, 2009 WL 4800140 (Wis. Ct. App. Dec. 8, 2009) – reminds us that the “key employee” doctrine is a fact-intensive inquiry and courts should not conclude that a lower level employee can never be a “key employee” with a duty of loyalty to his/her employer.
The trial court in Infocorp concluded that the following facts were undisputed: Hunt, a salesman for Infocorp, was an at-will employee; he did not have an employment contract, nor did he sign a non-compete or confidentiality agreement. In the summer of 2006, Hunt contacted a sales manager for Tierny Brothers (a direct competitor of Infocorp) and indicated an interest in working for Tierny Brothers. In mid-September 2006, Tierny Brothers interviewed and hired Hunt and Hunt resigned from Infocorp in early October 2006. However, in the month prior to his resignation, Hunt sought to divert specific sales to his new employer.
Based on the above facts, the trial court granted Hunt’s motion for summary judgment on the breach of fiduciary duty claim, reasoning that “Wisconsin cases clearly establish that employees are judged by a different standard and that only officers or policy making employees owe a duty of loyalty”. Thus, the trial court concluded, a salesman like Hunt owes no duty of loyalty to his employer.
The Wisconsin Court of Appeals reversed, holding that the duty of loyalty is not limited to only officers or policy making employees. Rather, in situations involving lower level employees, the determining factor is whether the alleged breach implicates the employee’s specific job duties. Infocorp, 2009 WL 4800140, at *3-4 (holding that evidence establishing that an employee acted directly contrary to his employer’s interest in the course of performing his specific duties is sufficient to support a finding that the employee breached a duty of loyalty to his employer). Specifically, the Infocorp court held that the evidence in that case “could support a finding that… Hunt, while still employed by [Infocorp], used his authority at [Infocorp] to divert business from [Infocorp] (by withholding customer orders until he joined Tierny Brothers), and to actively attempt to shift business  from [Infocorp] to Tierney Brothers, thereby breaching his duty of loyalty.” Id. at *4.
In other words, because Hunt was a salesman for Infocorp, he had a duty of loyalty to conduct his sales activities in the best interest of Infocorp. Assuming that he diverted those sales opportunities to a new employer while he was still employed by Infocorp, a jury could conclude that Hunt breached his duty of loyalty to Infocorp. Even though he was not a high ranking executive, Hunt was a “key employee” in the context of sales.