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Businesses: do you use non-compete agreements indiscriminately? P.1

Milwaukee mayor Tom Barrett wrote an interesting op-ed that was recently published in the Journal Sentinel. The subject of the piece was an issue that is important for many businesses in Wisconsin: non-compete contracts. For businesses, of course, non-compete agreements are a way to protect proprietary business information from being appropriated by former employees for the benefit of a competitor. For employees, they can reduce the ability to find alternative work.

The op-ed piece articulates a position taken by many opponents of non-compete contracts: non-compete agreements stifle innovation and new entrepreneurial activity, and ultimately harm the economy. The problem is especially felt in the water industry, the food and beverage industry, energy storage, and in electronic controls, according to Barrett.

Barrett specifically mentions lengthy contract durations, broad application to the workforce, and aggressive enforcement of non-compete agreements as problems that need to be addressed. He cites California’s approach to non-compete agreements—they are void by law in that state—as one reason for the innovation in places like Silicon Valley, suggesting that Wisconsin needs to take a tip from that approach.

Barrett’s take on the issue is certainly not the only possible conclusion that could be reached by looking at the evidence, but there is certainly some truth there. One takeaway for businesses may be: watch out for indiscriminate use of non-compete agreements.

For businesses, it is critical to protect company interests, but there are a variety of ways to do so, including enforcing intellectual property rights and trade secret protection. The use of non-compete agreements is inherently limited by law. Wisconsin, like other states, has specific requirements when it comes to the validity of non-compete agreements. It is important for businesses to understand these rules to ensure they are implementing enforceable non-compete agreements.

In a future post, we’ll briefly look at some of these requirements. 

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