Is My Automatically Renewing Contract Enforceable?

The Wisconsin legislature, effective May 1, 2011, has implemented strict notice requirements for any automatically renewing “Business Contracts” entered into after May 1, 2011.

The rule is codified through Wis. Stat. 134.49, and sets forth that any automatically renewing contract that does not make the following disclosures, will be held to be unenforceable as to the renewing term.

1. A statement that the contract will be renewed or extended unless the customer declines renewal or extension.
2. A statement indicating the duration of the additional contract period that would result from an automatic renewal or extension period.
3. A statement indicating whether an increase in charges to the customer will apply upon an automatic renewal or extension.
4. A description of action the customer must take to decline renewal or extension.
5. The date of the deadline for the customer to decline renewal or extension.

The statute also imposes new obligations on contracts in existence prior to May 1, 2011 that have an initial term of more than one year. If your business utilizes, or intends to utilize automatically renewing contracts, you should contact a Wisconsin Lawyer to ensure that they are in compliance with Wis. Stat. 134.49 and that they will be enforceable.

There are two purposes for a contract: 1) is to make sure the parties understand the deal, and 2) make sure one party or the other can enforce the deal if need be. If you don’t have a well written contract, you may not accomplish either of those goals.

What if my employee is sabotaging my company?

While your employees may not owe a duty of loyalty to you personally , the Wisconsin Supreme Court has held that employees do owe their employer a duty of loyalty.

In Burbank Grease Services, LLC v. Sokolowski, an employee was accused of stealing trade secrets of the Company while employed to benefit a competitor. The Court held that “A claim for the breach of an agent’s duty of loyalty may sound both in tort and in contract.” (“Tort” is a lawyer word for lawsuits involving negligence, fraud, or an injury to a person or business)
The question then becomes, what kind of duty does the employees owe to their employer? and at what point has it been breached? The Wisconsin Supreme Court explains in Burbank Grease that if they are a “key employee” then a fiduciary duty of loyalty exists.

What does this mean?

A fiduciary duty is the highest duty there is in the law. It is generally stated as the requirement that while acting in your capacity as an employee, you are required to put the interest of the company ahead of your own interests.

The practical implications of this are that your key employees need to be acting with the company’s best interests in mind while they are employed. This is not to say that anytime an employee makes a mistake you can sue them over it, as often times in business only with the benefit of hindsight can we see that a decision or action was a bad choice.

However, if you come to find out that an employee, while employed has been working to further the interests of him or herself or a competitor at the company’s expense, you may be able to take action to prevent it or recover your losses as a result of the injury from both the employee and perhaps the competitor that induced them to breach their duty.

If you suspect that an employee or agent of your company has breached a duty of loyalty and caused harm to your company, you may have the ability to seek recourse through the courts and should contact an attorney right away.

Update on Law-Suit over “Paid Sick Leave” in Milwaukee

The latest news I have seen comes from a Wisconsin Law Journal Article on Tuesday stating that the Metropolitan Milwaukee Association of Commerce’s (MMAC) directors unanimously chose to sue the city of Milwaukee to stop the sick-leave ordinance from taking effect. You can see the article here.

I am very interested to see what the complaint states, as well as how the city responds. Apparently the organization 9to5, which is a branch of the National Association of Working Women, is prepared to file an amicus briefs to support the city in a lawsuit. (An amicus brief is a brief that a third party can submit in support of a party in the action).

I try my best to stay very politically neutral in these posts, but I want to address one portion of this argument. In the above mentioned article is the following

Amy Stear, 9to5 Wiscsonin Director said the MMAC’s decision disregards Milwaukee residents who voted 130,562 to 60,796 Nov. 4 to approve the ordinance in binding referendum.

“Essentially,” Stear said, “they’re saying that they don’t care what’s important to us.”

Regardless of the merits one way or the other of the referendum, basically saying that it is right because the majority wants it, is a very weak argument. Throughout the history of this country there have been some very bad ideas that are held by the majority. As recently as fifty years ago there were portions of the this country where the majority felt that blacks should not be able to vote.

I am in no means saying this is the same situation, but “majority is right” in my mind is a very bad argument. If the referendum had said, “Everyone in Milwaukee gets $10,000” I am sure it would have passed, but it would not have made it legal, or a good idea.

The final piece of information I would love to get my hands on, is what percentage of Business Owners in Milwaukee, live in the city of Milwaukee. I have a feeling that an overwhelming majority of the people that this referendum adversely affects, business owners, were not even able to voice their opinion on the matter as they did not get to vote on the referendum.