Are you a Wisconsin employer who wants to prevent former employees from using your proprietary secrets against you? Are you an employee in Wisconsin who has signed or is being asked to sign a non-compete agreement? If so, then you will want to know how non-compete agreements work in Wisconsin.
In this article, we will discuss the following topics:
- What is a non-compete agreement?
- Why do employers use non-compete agreements?
- Are non-compete agreements enforceable in Wisconsin?
- How are non-compete agreements evaluated in Wisconsin?
- Is my non-compete agreement enforceable in Wisconsin?
Wisconsin law is very specific about what types of non-competes are enforceable. Employers and employees alike should take note.
What Is A Non-Compete Agreement?
A non-compete agreement is a type of contract known as a restrictive covenant. Generally, employers use non-compete agreements to keep current and former employees from engaging in behavior that takes business away from the employer. A non-compete agreement may prohibit a former employee from directly competing with the employer in a specific geographical area for a specific amount of time. This is generally a prohibition on soliciting the employer’s current clients or a general ban on engaging in the same type of work. There are other types of restrictive covenants called non-solicitation agreements. They are not covered in this article.
Why Do Employers Use Non-Compete Agreements?
Employers use non-compete agreements to protect their businesses. Some types of employees, like salespersons, may have access to customer lists, including information such as contract terms and renewal dates. Other employees may be taught valuable or unique skills on the job that give them specialized knowledge they would not have had otherwise. In some situations, the employer’s interest in protecting its business may outweigh the employee’s interest in freely earning a living.
Are Non-Compete Agreements Enforceable in Wisconsin?
Non-compete agreements are difficult to enforce because Wisconsin law favors individuals earning a living. The Wisconsin state legislature has passed a statute that establishes the requirements for an enforceable non-compete agreement.
Section 103.465 states, “A covenant by an assistant, servant or agent not to compete with his or her 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 section, 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.”
Simply put, non-compete agreements are unenforceable unless they are reasonably necessary to protect the employer and are limited to a specific physical area for a specific amount of time.
How Are Non-Compete Agreements Evaluated in Wisconsin?
Wisconsin courts give non-compete agreements very close scrutiny. Wisconsin law favors the mobility of workers—contracts that prevent them from working where they choose are disfavored under the law. Agreements that do not closely comply with the statute may be found unenforceable.
One common issue raised by courts is the geographic limitations of a non-compete. The limit must be specific. Courts have found that clauses prohibiting competition with, for example, “all customers” of a business have the effect of being a nationwide ban. The lack of a specific territory makes the restriction unenforceable.
Another issue is whether there is a specific time limit. If a non-compete is unlimited, then it is unenforceable. That does not mean that any time limit is acceptable. A restriction that lasts 99 years is functionally the same as one that is “forever.”
This is why courts also examine whether the restriction is reasonably necessary to protect the employer. The nature of the employer’s business matters; so does the employee’s job. For example, courts have drawn distinctions between types of salespeople. When customers develop a personal relationship with their salesperson, they may be more likely to leave a business and follow the salesperson. Wisconsin law recognizes that employers have a protectable interest in these relationships. However, a salesperson who doesn’t have a specific, set of customers may not create the same protectable interest. Courts also recognize the protection of confidential information and special or unique skills as legitimate interests.
Is My Non-Compete Agreement Enforceable in Wisconsin?
Whether a specific non-compete agreement is enforceable will depend on the specific facts surrounding the agreement. Determining whether something is reasonable requires an examination of the specific situation. Employers seeking to establish and enforce non-compete agreements want to be careful to specifically limit the agreements in time and territory. They must also be specific about the interest they seek to protect.
If you are an employer looking to craft or improve a non-compete agreement, or an employee wondering about their rights, then you should consult with a licensed Wisconsin attorney to learn more.
While we serve clients in Wisconsin, if you’re in the Waukesha area and are looking for an experienced Waukesha employment law attorney to assist you, please feel free to reach out to O’Flaherty Law at:
741 N Grand STE 304
Waukesha, WI
(262) 214-5473
waukesha@oflaherty-law.com
https://www.oflaherty-law.com/locations/waukesha
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