A Wisconsin non-compete agreement allows an employer to limit the signing party’s ability to work for, or start a rival company in the same region. The contract must protect a legitimate business interest, and the provisions therein must be only so restrictive as to accomplish this goal. In the agreement terms, the employer may define the contract’s duration, the restricted area, and the prohibited activities. A non-compete cannot unfairly limit a party’s ability to find gainful employment, and the court may not enforce the agreement if its restrictions are too broad.
Non-compete agreements are enforceable as per § 103.465 of the Wisconsin statutes. The law provides general guidelines for enforceability, requiring that a non-compete be necessary for the employer’s protection and that the restrictions be reasonable. Agreements that lack a protectable interest cannot be enforced, regardless of whether they are reasonable.
A non-compete agreement is valid so long as it complies with the conditions listed below:
- The activity, geographic, and time restrictions are reasonable and do not cause injury to the public.
- The agreement is supported by consideration.
- The agreement protects a legitimate interest, such as:
- company goodwill;
- client/customer relations;
- trade secrets; or
- company information or data.
- The agreement is not unduly harmful or restricting to the employee.
- Restricting attorneys. An attorney is prohibited from making or entering into an agreement that restrains them from practicing law, including those made in connection to a client’s settlement. Agreements dealing with retirement benefits, however, may be permitted.
There is no Wisconsin statute that sets a limit for the duration of non-compete agreements. The courts have regularly upheld durations between one (1) and two (2) years, as in the following cases:
- A two (2) year restriction on an oil company salesman.
- A two (2) year restriction preventing a physician from contacting former patients.
- A one (1) year restriction on a lessee of a lunch wagon from soliciting the lessor’s former customers.
- A one (1) year restriction upheld by a federal court prohibiting a franchisee from competing with the franchisor.
The geographical area must be reasonable and necessary to prevent unfair competition. The region where the employer does business is usually considered an appropriate scope. Previous decisions made in Wisconsin courts have allowed for the following geographic restrictions:
- A twenty (20) mile radius on a physician.
- A fifty (50) mile radius on the former medical director of a clinic.
- A high-level employee was subject to a restriction that extended beyond where their employer’s customers’ location.
Agreements without a defined geographic region are void. Courts have also turned down countrywide restrictions for non-competes when the restricted party had only performed work in one county.
While not expressly stated in state statutes, common law has shown that agreements without consideration are unenforceable. Employment is sufficient consideration if the contract is signed prior to or concurrently with the signing party accepting the job offer. Continued employment has been deemed adequate consideration for at-will workers, though no set period has been defined as satisfactory.
Financial compensation or bonuses are also valid forms of consideration provided they are given directly in connection with the agreement and solely to those signing a non-compete. A court may decline to enforce a non-compete if an employer fails to make clear to the employee what they are providing as consideration.
- Wis. Stat. § 103.465
- NBZ, Inc. v. Pilarski, 185 Wis. 2d 827, 520 N.W.2d 93 (Wis. Ct. App. 1994)
- Hunter of Wisconsin, Inc. v. Hamilton, 101 Wis. 2d 460, 304 N.W.2d 752 (Wis. 1981)
- Pollack v. Calimag, 157 Wis. 2d 222, 458 N.W.2d 591 (Wis. Ct. App. 1990)
- Star Direct, Inc. v. Dal Pra, 2009 WI 76, 319 Wis. 2d 274, 767 N.W.2d 898
- Wis. R. of Prof’l Conduct 20:5.6
- Lakeside Oil Co. v. Slutsky, 8 Wis. 2d 157, 164-66, 98 N.W.2d 415, 420 (1959)
- Chuck Wagon Catering, Inc. v. Raduege, 88 Wis. 2d 740, 753-55, 277 N.W.2d 787, 793 (1979)
- HR Block Eastern Tax Services, Inc. v. Vorpahl, 255 F. Supp. 2d 930, 935 (E.D. Wis. 2003)
- Fields Found., Ltd. v. Christensen, 103 Wis. 2d 465, 477-79, 309 N.W.2d 125, 132 (Ct. App. 1981)
- Gary Van Zeeland Talent, Inc. v. Sandas, 84 Wis. 2d 202, 217-19, 267 N.W.2d 242, 250 (1978)
- Union Central Life Ins. Co. v. Balistrieri, 19 Wis. 2d 265, 120 N.W.2d 126 (Wis. 1963)
- Equity Enterprises v. Milosch, 247 Wis. 2d 172, 178-79, 2001 WI App. 186, 633 N.W.2d 662, 666 (Wis. Ct. App. 2001)
- Wis. Ice & Coal Co. v. Lueth, 250 N.W. 819, 820 (Wis. 1933)
- Runzheimer Int’l, Ltd. v. Friedlen, 2015 WI 45, 362 Wis. 2d 100, 105-07, 862 N.W.2d 879, 882
- Medrehab of Wisconsin, Inc. v. Johnson, 218 Wis. 2d 163, 578 N.W.2d 208, at *1 (Ct. App. 1998)
- Selmer Co. v. Rinn, 2010 WI App 106, 328 Wis. 2d 263, 279-80, 789 N.W.2d 621, 629
- Reiman Associates, Inc. v. R/A Advertising, Inc., 102 Wis. 2d 305, 306 N.W.2d 292, 295-96 (Wis. Ct. App. 1981)
- Streiff v. American Family Mut. Ins. Co., 118 Wis. 2d 602, 348 N.W.2d 505 (Wis. 1984)
- Gen. Med. Corp. v. Kobs, 179 Wis. 2d 422, 431-33, 431507 N.W.2d 381, 385 (Ct. App. 1993)
Wisconsin Non-Disclosure Agreement – A contract requiring one or both parties to maintain the secrecy of proprietary information.
Wisconsin Non-Solicitation Agreement – An agreement stating that an individual may not recruit their employer’s customers or employees for a specified duration.