What Is a Non-compete Agreement?
A Non-compete agreement is a provision in a contract that prevents one party from competing against the other party. Non-compete agreements are common in employment contracts, shareholder operating agreements, and business sales.
Why Would a Company Want a Non-Compete?
Non-compete agreements can be vital for many companies. There are many stories of companies going bankrupt after losing key employee to a competitor. Companies that are dependent on a few key individuals or who spend significant financial resources training and/or recruiting their employees should consider whether non-compete agreement is appropriate.
Are Non-Compete Agreements Enforceable In Wisconsin?
A non-compete agreements are enforceable in Wisconsin. However, Wisconsin courts do not like non-compete agreements and will not enforce agreements that are overlybroad.
The non-compete agreement should only be as broad as necessary to protect the employer. The restriction must be reasonable in terms of time, territory, and not contrary to public policy.
What Should I consider when Drafting a Non-Compete Agreement?
Drafters of Non-compete agreements must proceed with caution if they want the provision to be enforced. Non-compete agreements in Wisconsin must be enforceable in all respects or the entire provision will fail. Wisconsin courts will not revise over-broad restrictions to make the restriction more reasonable. Rather, Wisconsin courts will strike down the entire restriction.
Businesses seeking to use non-compete agreements need to examine their business and consider how much protection is needed (as opposed to desired).
Is the provision necessary for the employer’s protection?
A non-compete agreement with the a company’s top sales person is probably necessary for the company’s protection. However, is a non-compete agreement necessary for a lower tiered and lower compensated staff members? If a company tries to get too aggressive it could risk having its agreements struck down?
Are the Restrictions Reasonable?
The time and distance restrictions must be reasonable to protect the company and cannot be over-broad to the employee. In other words, if company must be able to demonstrate that it has legitimate business interests with in the territorial restriction or the provision will be struck down. Likewise, the time restriction must be reasonable. Wisconsin Courts have held that 2 years is reasonable restriction. Of course, the length of the restriction is dependent on the nature of a company’s business.
Need Help? Murdock Law’s business lawyers have helped many businesses protect themselves with non-compete agreements. Please contact us if you believe your business could benefit from non-compete agreements.