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Businesses: do you use non-compete agreements indiscriminately? P.4

We’ve been exploring in recent posts the topic of non-compete agreements, and the limitations and requirements for their valid use here in Wisconsin. Last time, we began discussing the requirement that non-compete agreements be supported by consideration, which is a general requirement for any contract.

Employers do not necessarily need to offer an employer additional compensation as consideration for a non-compete agreement. Employers may, for instance, use continued employment as consideration for a non-compete agreement. As we mentioned last time, employers are free to terminate an employee who refuses to sign a non-compete agreement, but may also use a decision not to fire an employee as the consideration for a non-compete agreement going forward. 

Two other important requirements worth mentioning in connection with non-compete agreements are that the terms of the agreement must not be unreasonable to the employee, and must also not be unreasonable as a matter of public policy. An agreement which makes it extremely difficult for an employee to obtain alternative employment, or which creates a situation where the employee has to make unreasonable life changes to obtain alternative employment is likely not going to be enforceable. Likewise, requiring non-compete agreements to be signed by low-wage employees or employees who really have no access to protected information that would present a serious risk to the company is a practice to be avoided as well.

Employers need to not only be cautious about the terms of their non-compete agreements, but also about the language they use in their workplace policies and guidelines, employee handbooks, and so on. The language and terms set forth in these documents, if not harmonized with any outstanding non-compete agreements, can create confusion for employees and potentially complicate matters in the event an employee decides to challenge a non-compete agreement. Working with experienced legal counsel can help businesses to avoid potential problems and limit potential liabilities. 

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