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Businesses: do you use non-compete agreements indiscriminately? P.3

In our last couple posts, we’ve been looking at the topic of non-compete agreements, and specifically at some of the requirements of Wisconsin law when it comes to negotiating valid and enforceable non-compete agreements. As we noted last time, non-compete agreements must be reasonable with respect to duration and territory.

In addition, the restrictions placed on an employee must be reasonably necessary in order to protect the employer’s interests. Employers must not be overbearing in protecting their interests. Courts tend to view restraints on trade with disfavor, so employers should be cautious not only with the terms of their non-compete agreements, but also with the specific employees they require to sign these agreements. 

Another important point to make, however, is that non-compete agreements do not destroy the principle of at-will employment. Many employees who sign non-compete agreements do have certain protections from at-will termination, but non-compete agreements do not of themselves destroy at-will employment. And, to be clear, an employer is not prohibited from terminating an employee who refuses to sign a non-compete agreement the employee believes is unreasonable. At the same time, employers are not able to induce an employee to sign a non-compete agreement and then promptly fire them with the expectation that the non-compete agreement will be applied.

Another requirement of non-compete agreements in Wisconsin is that they must be supported by consideration, or quid pro quo. Employers need to be sure they support their agreements with sufficient consideration. In our next post, we’ll pick up on this point and continue looking at some other requirements under Wisconsin law, and the important role an attorney can play in helping an employer draft and negotiate sound non-compete agreements.

Source: Wisconsin Statutes, Section 103.465

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