Protecting the Farm: Employment Considerations

February 17, 2022

“Protecting the Farm” is a common phrase associated with succession planning but employment considerations are just as important in protecting an agribusiness. Employment considerations include how to protect confidential information and skilled farm employees.

At-Will Employment

Wisconsin is an “at-will” employment state. That means both the employee and the employer are free to terminate the employment relationship at any time, without reason – with limited exceptions.

The at-will doctrine provides flexibility for employers – so long as it’s not for an illegal reason – that allows the employer the right to terminate an employee at any time. For example as an agribusiness changes, if the owner makes business decisions to consolidate production or shift from one direction to another, there may be some employees for whom there is no longer a business. Employers are able to eliminate employees in a situation like that without notice. That flexibility is a perk to the at-will-employment relationship for employers.

But there can be a downside to the at-will relationship because it allows employees to move from job to job with ease. Employees can terminate an employment relationship at any time and without providing any notice. That can result in a company being short-handed or without a valuable employee without any warning.

Employment Contracts

In the current labor market, the ability for employees to leave may outweigh the benefit of the “at-will” employment relationship for employers. To contravene that “freedom” employers can enter into an employment agreement with key employees. An employment agreement is a contract between the employer and the employee. It’s used to dictate certain terms of employment such as length of employment, if fixed, and special benefits the employee is entitled to.

An employment agreement does not need to change the nature of the employment relationship from at-will, but some employers may desire to do so. The agreement can specify the parameters around separation of the employment relationship. For example the loss of a skilled cheesemaker without notice may seriously harm a business. To prevent that harm, the owner may want to enter into an employment agreement that requires the cheesemaker to only leave “for cause” or upon a 90-day notice. That contractual buffer provides the owner with more time to fill the position than the at-will employment relationship does.

The cheesemaker example, used throughout the article, can easily be substituted for a dairy-herd manager, a seed-sales manager, an equipment technician, a mechanic or any other key employee an agribusiness relies upon.

Non-Compete Provisions

More important to employers is non-compete provisions that can be incorporated into an employment agreement. Those provisions can be included in the employment agreement or contained in a separate agreement that does not change the status of the employee from at-will.

In Wisconsin non-compete provisions must be drafted narrowly to protect an agribusiness and cannot be overly restrictive of the employee. When drafted properly they work to protect legitimate business interests from unfair competition.

There are four different types of non-compete provisions that can protect an agribusiness.

  • Non-competition prohibits employees from leaving an agribusiness and providing similar services to a competitive agribusiness within the region where the first operation conducts business. For example the provision prevents a cheesemaker from moving across town to a competitor and then using the skill set built in the first business for that competitive agribusiness.
  • Non-solicitation of employees protects an agribusiness by prohibiting a past employee from poaching remaining key employees to come work for a competitive business. For example if the head cheesemaker leaves a business, the business owner would not want her or him to come back to solicit other cheesemakers to leave and go work for a competitor.
  • Non-solicitation of customers protects an agribusiness by prohibiting a past employee from stealing customers. It prohibits the past employee from taking customers that he or she has a relationship with because of employment with the first agribusiness, or that he or she has special knowledge about because of their past employment.
  • Non-disclosure agreements protect confidential business information and trade secrets. It prevents an employee from sharing information – including competitive business information such as practices, business strategies, pricing, customer lists and much more.

Not every employee within an agribusiness has the knowledge or expertise to require any type of agreement. But every organization has employees who could do damage if they left – whether it be an employee who has great relationships with suppliers, or a cheesemaker with an impeccable skill set or top-level management employees with knowledge of competitive confidential information.

Contact legal counsel to navigate what contractual relationships might be desirable with key employees to protect the agribusiness and to ensure enforceable agreements are drafted to protect the farm.

© 2022 Agri-ViewMadison, WI.  Reprinted with permission.

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