Non-Compete Agreements Under Wisconsin Law 101

A non-compete agreement is one of the most significant employment-related documents an employer may ask an employee to sign. It can help protect customer relationships, confidential information, trade secrets, goodwill, and other legitimate business interests when an employee leaves the company. At the same time, a non-compete can restrict an employee’s ability to earn a living. For that reason, Wisconsin courts scrutinize these agreements carefully and will not enforce restrictions that go further than Wisconsin law permits.

Wisconsin is not a state that prohibits non-competes altogether. However, Wisconsin has a strict statute governing restrictive covenants in employment contracts. Under Wis. Stat. § 103.465, a covenant not to compete is lawful and enforceable only if the restrictions are reasonably necessary for the protection of the employer. If a restriction is unreasonable, the covenant is illegal, void, and unenforceable even as to any portion that might otherwise have been reasonable.

Why is Wisconsin Law So Important?

Wisconsin law treats non-compete agreements with caution because they restrain trade and limit employee mobility. The fact that an employer wants protection from competition is not enough. The employer must be able to identify a legitimate business interest that justifies the restriction, such as protecting confidential information, trade secrets, specialized customer relationships, or other competitive information that gives the employer a real business advantage.

Wisconsin courts generally evaluate restrictive covenants using several core requirements. The restriction must be necessary for the protection of the employer, must contain a reasonable time limit, must contain a reasonable territorial or activity-based limitation, must not be harsh or oppressive to the employee, and must not be contrary to public policy. If the agreement fails any one of these requirements, the restriction may not be enforced.

What Provisions Should Employers Pay Close Attention To?

Employers should pay careful attention to the scope of the restricted activity. A non-compete should not prohibit an employee from working for a competitor in any capacity if the new role would not threaten the employer’s legitimate interests. For example, an agreement that bars a former employee from taking any job with a competitor may be overbroad if it prevents work unrelated to the employee’s former duties, customer contacts, or confidential information.

Employers should also review the duration and territory of the restriction. Wisconsin law requires a specified time and a specified territory or comparable limitation. The restriction should be no broader than necessary to protect the employer’s actual business interest. A territory tied to the area where the employee worked, sold, serviced customers, or had meaningful customer relationships is more likely to be defensible than a restriction covering locations or markets the employee never served.

Non-solicitation provisions also require careful drafting. A customer non-solicitation clause should generally be limited to customers or prospective customers with whom the employee had material contact or about whom the employee obtained meaningful confidential information. Likewise, employee non-solicitation provisions should be tailored so they do not prohibit contact with employees who had no meaningful connection to the departing employee or the employer’s protectable interests.

Common Drafting Mistakes

A common mistake is using a form agreement without tailoring it to the specific employee, position, industry, customer relationships, and confidential information involved. A restriction that may be reasonable for a senior salesperson, executive, or employee with access to strategic customer information may be unreasonable for an employee who has little or no access to those interests.

Another mistake is assuming that a court will rewrite an overbroad agreement. Wisconsin law is particularly unforgiving on this point. If a restrictive covenant imposes an unreasonable restraint, it may be void and unenforceable even as to language that could have been reasonable if drafted more narrowly. Employers should not rely on a court to fix an overbroad covenant after the fact.

Employers should also avoid internal inconsistencies. For example, a confidentiality agreement, non-solicitation agreement, employment agreement, equity agreement, and handbook may all address post-employment conduct. If those documents use different definitions, different restricted periods, or different remedies, the inconsistency can create confusion and weaken enforcement.

Confidentiality provisions also require careful drafting. A confidentiality clause included in a non-compete or restrictive covenant may be overbroad if it defines confidential information so broadly that it effectively prevents an employee from using general knowledge, ordinary skills, or publicly available information. Employers with true trade secrets should protect those trade secrets through a properly drafted agreement and through actual business practices designed to preserve secrecy. Under Wisconsin law, information generally qualifies as a trade secret only if it derives independent economic value from not being generally known or readily ascertainable and is subject to efforts to maintain its secrecy that are reasonable under the circumstances. In other words, a trade secret is only secret if the employer uses reasonable means to keep it secret.

How to Keep Non-Compete Agreements Current

Employers should review restrictive covenants regularly, especially when employees change roles, begin serving new territories, gain access to different confidential information, or develop new customer responsibilities. A covenant that was appropriate when an employee was hired may become incomplete, outdated, or mismatched as the employee’s role changes.

Employers should also monitor legal developments. Non-compete law is changing rapidly across the country, and some states have adopted bans, salary thresholds, notice requirements, industry-specific limits, or other procedural rules. Employers with employees in Wisconsin and other states should not assume that one form agreement will work everywhere.

Bottom Line

For these reasons, Wisconsin employers should review their non-compete and non-solicitation agreements carefully before using them and before attempting to enforce them. The agreement should be written in plain language, tied to a legitimate business interest, limited in time and territory, and tailored to the employee’s actual role and access to protectable information or relationships. A well-drafted restrictive covenant can be an important risk-management tool. A poorly drafted one can create uncertainty, increase litigation risk, and provide no meaningful protection when the employer needs it most.

All states are different. If an employer operates in multiple states, the employer must tailor each non-compete to the law of the applicable state or craft a restrictive covenant that is designed to be enforceable in multiple states. Because the requirements can vary significantly by jurisdiction, employers should seek legal guidance before relying on a single form agreement across a multistate workforce.

This article, slightly modified to note recent updates, was featured online in the Great Lakes Employment Law Letter and published by BLR®—Business & Legal Resources. Reproduced here with the permission of BLR®—Business & Legal Resources.