Businesses often use non-compete agreements to prevent employees from either taking a job with a competitor or from starting a competing business for some period of time after leaving employment. Non-compete agreements are allowed in Wisconsin. Courts will uphold a non-compete agreement which is necessary to protect legitimate business interests; reasonable in time and space; not harsh or oppressive to the employee and not contrary to public policy.
Is a Non-Compete Agreement Legally Enforceable in Wisconsin?
Wisconsin law provides a specific statute that governs non-compete agreements. While non-compete agreements are permitted, their terms are regulated under Wisconsin Statutes section 103.465 (2018). [1]
The statute provides that a non-compete agreement “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.”
What Can Be Protected?
In Wisconsin, a non-compete agreement can be used to protect trade secrets; confidential business information; customer relationships.
Reasonable Uses and Objections
When using a non-compete agreement in Wisconsin, you should keep in mind the following:
- Enforceable when terminated without cause? Not decided
- Employee non-solicitation agreement permitted? Yes
- Customer non-solicitation agreements permitted? Yes
- Does continuing employment equal sufficient consideration? Yes
- Statute of Limitations for breach of contract: 6 years
Wisconsin Non-Compete Limitations
Time limitations
The Wisconsin statute clearly provides that any non-compete agreement must contain a time limitation to be valid.
Geographical limitations
The Wisconsin statute also provides that any non-compete agreement must contain a geographical area to be valid. In drafting a geographical limitation, employers must be especially precise to avoid terms that might seem unlimited in scope. Thus, while an agreement “not to solicit all customers” of the employer might on its face seem reasonable, it can be construed as an effective nationwide ban and be deemed unenforceable.
Other limitations
The implication of the Wisconsin statute is that if any part of the non-compete agreement is found to be unreasonable, the entire agreement is unenforceable and void, even if some other provisions would be considered reasonable. This rule prevents Wisconsin courts from modifying non-compete agreements at trial in order to make them enforceable, under some variation of the “blue pencil” doctrine.
In drafting a Wisconsin non-compete agreement, an employer must use care and foresight in preparation. Each term must be carefully drawn to protect a legitimate business interest. The agreement must contain a geographical scope, which is limited, and a time duration, which is also limited. Agreements which are vague and excessively broad in scope are unlikely to be upheld, given the terms of the Wisconsin statute. Agreements that are precise and narrowly tailored seem more likely to be upheld in the court. Taking a moment to recite the legitimate business concerns of the employer in the contract may be prudent.
Wisconsin Non-Compete Agreement Sample
This Wisconsin non-compete agreement template will let you draft an up-to-date agreement for your business clearly, simply, and inexpensively:
Non-Compete Agreement
