A non-compete agreement between employers and employees in Wisconsin can be used to prevent an employee from engaging in certain activities in a particular geographical area for a period of time after the employee stops working for the employer.
Non-compete agreements, often known as covenants or restrictive agreements, are arrangements between employer and employee that are used by employers to limit the ability of an employee to start working for a rival or competition for a period of time after leaving the company. This will help prevent the former employee from revealing trade secrets and other confidential information.
NON-COMPETES IN WI
Wisconsin has a law (Section 103.465) regulating these non-compete clauses. The law specifically states that it will be enforceable if the non-competitive arrangement is fairly necessary to protect the employer and the scope of the agreement is fair in both geographical location and time limitations.
Employers are generally allowed to require employees to enter into non-solicitation agreements as part of non-compete agreements. Non-solicitation agreements forbid employees leaving the employer from pressuring other employees of the employer to switch jobs or leave the employer otherwise. Such arrangements usually occur in two situations:
- When the worker is employed, and the non-competitive and non-solicitation agreements form part of the consideration given in exchange for being hired or continued employment, or
- When the job is terminated, and the non-competitive and non-solicitation agreements form part of the consideration given in exchange for some kind of termination compensation.
WI Supreme Court ruling
The Wisconsin Supreme Court ruled that a non-solicitation contract for employees is unenforceable if it unreasonably limits the right of the employee to freely compete in the labor pool for the best talent. This ruling (The Manitowoc Company v. Lanning, 2018 WI 6) is an important decision which may affect the enforceability of existing non-solicitation agreements which are not tailored to the specific situation of an employee. The case involved a covenant prohibiting solicitation of employees and was held unreasonable.
Employers still have the option of signing non-solicitation agreements, but they must be fairly measured to refer only to what is actually necessary for employer safety. This could mean, on the basis of what the Court said in its opinion, that the application of non-solicitation agreements should be restricted to key workers, such as top-level employees, those with trade secrets or those with unique skills or knowledge that would be difficult to replace, or staff with whom the former employee worked.
Is the entire contract unenforceable because of one invalid provision?
Until 2010, the courts of Wisconsin ruled that if a clause in the agreement not to compete was unenforceable, the remainder of the contract would be unenforceable. Star Direct, Inc. v. Dal Pra concluded this. In that case, the Supreme Court of Wisconsin ruled that unenforceable clauses could be separated from the rest of an employment agreement and that the remaining parts could be applied if they could be interpreted and executed without the invalid provisions being referred to.
Review and amend
The enforceability of a non-competitive agreement will transform on a single word. To order to identify the particular competitive risk that an individual employee faces, you must carefully draft it. Use out – of-state agreements or contracts drawn up to cover a wide range of employees may result in an unenforceable agreement. A best practice is to routinely review and revise the agreements to conform in accordance with Wisconsin law. It is best to hire an experienced lawyer whether you are a business owner seeking to draft a reasonable and enforceable Non-Compete or an employee accused of violating an unreasonable one.