If you have come across this article, it is likely that you are considering signing a non-compete agreement or are trying to figure out if the one you signed (perhaps without realizing it) is enforceable. Wisconsin courts tend to disfavor non-compete agreements that are not very narrowly tailored. Wisconsin wants to keep workers working. To do that, the workers need to be able to move to other jobs. Non-compete agreements that are too narrow, in other words, that place too many restrictions on a worker after they leave the company, would curtail free movement.
Read on to learn more about a non-competition agreement and how long a non-compete can last under Wisconsin employment law.
What Is A Non-compete?
To keep it simple, a non-compete agreement is an agreement that an employee and the company they work for sign. It i usually signed when the employee begins their employment with the company. If you are wondering, "What does non-compete mean?" Non-compete with a company means that when the employee leaves their employment with that organization, they agree not to compete with the business, directly or indirectly.
The terms of the non-compete typically lay out how long the former employee is bound by the agreement and the geographic area the agreement covers. The broader the scope of the terms of the non-compete agreement, the less likely it is to hold up in court. A broad-scope non-compete agreement is less likely to hold up in a court battle because the former employer cannot reasonably expect to curtail a person's employment opportunities indefinitely, and limits must be enforced.
How Is A Non-disclosure Different From A Non-compete?
Often the company hiring the employee will present an agreement that contains both a non-compete and a non-disclosure together. It can sometimes be challenging to understand the two different tools and your rights concerning them. Unfortunately, some companies minimize the importance of these two agreements when presenting them to the employee for review and signature, bundling them in with other standard human resources paperwork. Let's look at the difference between the two agreements and how to recognize them when you see them.
Non-compete: the employee will agree that if they leave the company's employment and take a job with another company, they will not be performing specific duties and will not be attempting to work with clients that the company considers "theirs." In other words, the employee will not directly compete against the company for a period of time in a specific geographic area.
Non-disclosure: the employee will agree to not disclose, in other words, tell or share with anyone, the trade secrets and other confidential information of the company, some examples that would constitute "trade secrets" could be a chemical formula, how the company decides what to charge a customer or the design details of an item the company sells. It can also be referred to as a "confidentiality clause," where again, the employee agrees to keep company information confidential and not to share it with anyone. The penalties for disclosing confidential information or trade secrets can be substantial.
How Long Does A Non-compete Last?
Herein lies one of the most critical aspects of the non-compete agreement when it comes to enforceability. The agreement must be limited when it lays out a time frame that the employee will be bound by the non-compete. There is no hard and fast rule, and the terms of the agreement will include what the time frame is. The employee will know what the time limit on the agreement is before they sign it, but, again, it must be a reasonable time limit. In other words, if the agreement tried to set a span of five years, that would be an exceptionally long time and likely not enforceable. On the other hand, a time limit of six months would most likely be considered reasonable. The bottom line is that the period of time given in the non-compete should not exceed what is reasonably necessary to protect the company's interests. The particular facts and circumstances of your situation will also play a part in a court deciding if the time limit is reasonable. The best course of action to take when faced with a non-compete agreement is to have a Wisconsin non-compete attorney review it before you sign it.
How Does Wisconsin View A Non-compete Agreement?
As stated above, Wisconsin courts tend to disfavor any non-compete agreement that is not narrowly tailored. A Wisconsin non-compete agreement is viewed by the court in light of the governing law, which is Wis. Stat. §103.465, the statute that handles Wisconsin non-compete agreements. There are five elements in the statute that Wisconsin courts will consider when making a determination about the enforceability of a non-compete agreement:
1-Does the restriction violate public policy?
2-Does the agreement contain reasonable time limits?
3-Does the agreement cover a reasonable geographic area?
4-Does the agreement impose unnecessary hardship on the employee?
5-Is the agreement reasonably necessary to protect the employer?
We have already talked about time limits in the non-compete agreement. The next question is if the agreement covers a reasonable geographic area.
The geographic area: The scope of the geographic area should be limited. As an example, Wisconsin courts may find the scope of the state of Wisconsin reasonable but not the entire Midwest. The court may find that the Midwest is reasonable but not the entire country. Again, it boils down to what the employee will be doing for the company in the scope of their employment and the particular facts and circumstances of the individual case.
Does The Agreement Violate Public Policy?
When the courts consider something in light of public policy, what that means is that the court will look at enforcing something in the light of whether that enforcement will contribute to the public good. If the courts determine that enforcement goes against the public policy, it means that courts don't think enforcement is a good idea for anyone and will not create a precedent opposed to that by enforcing the agreement.
Does The Agreement Impose An Undue Hardship On The Employee?
The courts will consider the employee's particular situation in the light of enforcing the agreement. For example, if the employee only has a particular set of skills that they can use to earn a living and the agreement being enforced would send them into poverty, the court would consider that undue hardship. On the other hand, if the agreement only seeks to impose reasonable limits on what the employee did for the company but no other skills the employee could use to earn a living, the court might not view it as unduly hard on the employee.
Is the agreement reasonably necessary to protect the employer? This is another element where the individual facts and circumstances of the situation will come into play. If a company is involved in a highly specialized and cutting-edge type of work, then the agreement might be reasonably necessary. If the company does work that many other companies do, then the agreement might not be reasonably necessary. For example, does the company design and produce patented technology, or does the company bake and sell bread to make money? While that is an extreme example, you can still see that there is a vast gulf between the two, showing that the more specialized and rarer the work produced is, the more likely it is that a court would find that the agreement is reasonably necessary.
It is essential to understand that the elements listed above are looked at together and in context. Just because you think that one element doesn't seem enforceable by a Wisconsin court does not mean that you are automatically out of the non-compete. The court will look at all of the elements together and then make a decision based on the elements plus any additional factors that are presented to the court. IT would be better to be aware of what you agree to before any dispute arising in order for you to have a complete understanding of what could lie down the road if you choose to go to work for another company.
Was The Company Upfront With You When You Were Asked To Sign The Non-compete?
This is an area that is ripe for litigation. The company should be 100% up front with the employee about what the document is and give the employee reasonable time to review it and possibly discuss it with outside counsel. Sometimes the company will include the non-compete with a packet of new hire paperwork. Sometimes the company will ask you to sign it after you have already started work with the company. These are all factors that could be considered by the court if the company either decides to attempt to enforce the non-compete or penalize you for not signing it after you have begun employment with the company.
What If I Don't Know If I Should Sign Or Not?
The best thing you can do when faced with your employer or potential employer asking you to sign a non-compete is to take it to a non-compete lawyer in Wisconsin. The critical thing to remember is that you don't have to sign it, you have a right to independent counsel, and you have a right to think things over. A frank discussion with an independent attorney will be invaluable to you so that you truly understand the implications of what you are signing if you do choose to sign it. You also have a right to negotiate the terms so that they are more in your favor. For instance, you can ask that the time limits are shortened, or the geographic scope of the agreement is more limited. You can ask for additional consideration from the employer in return for signing the agreement.
The decision to sign a non-compete agreement doesn't have to be a bad one. You can always negotiate for terms that are more in your favor if you really want to take the job. If you find yourself faced with a non-compete agreement and aren't sure of what you should do or what the best options are, feel free to reach out to O'Flaherty Law. Our team of Wisconsin non-compete lawyers would be happy to help you and make sure that you are set for a great future with your new job.
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