Key Takeaways

  • Non-compete agreements in Wisconsin must be reasonable in duration, geography, and scope to be enforceable.
  • A one-year time limit is typically considered reasonable; longer durations may be invalidated.
  • Employers must provide valid consideration when presenting a non-compete to a new or current employee.
  • Wisconsin courts do not rewrite overly broad agreements—they strike them down entirely.
  • A recent proposed federal FTC rule could ban most non-competes nationwide, creating uncertainty for Wisconsin employers.
  • Employers may consider alternatives such as non-solicitation or confidentiality agreements.

Non-Compete Agreement Wisconsin

A non compete agreement Wisconsin is used between Wisconsin employers and employees to prevent an employee from engaging in certain activities for a period of time in a particular geographical area after the employee stops working for the employer.

Non-compete agreements, also referred to as covenants not to compete or restrictive covenants, are employer-employee contracts that are used by employers to limit an employee’s ability to begin working for a competitor for a period of time after leaving the company. This will help prevent the disclosure of trade secrets and other confidential information that the former employee might have.

Recent Developments: FTC's Proposed Ban on Non-Competes

In 2023, the Federal Trade Commission (FTC) proposed a sweeping rule that would ban most non-compete clauses across the United States, including in Wisconsin. The final version of this rule is expected to be published in 2024. If enacted, it would prohibit employers from entering into non-compete agreements with workers and require the rescission of existing agreements in most cases.

Key points of the FTC's proposed rule include:

  • Retroactive Application: Employers would need to notify current and former employees that their non-compete agreements are no longer valid.
  • Exceptions: Non-competes related to the sale of a business or where a partner holds a significant ownership interest may still be enforceable.
  • Legal Challenges: Multiple lawsuits are expected, which could delay or prevent enforcement of the rule.

While the FTC’s rule is not yet in effect, Wisconsin employers should monitor developments closely. Businesses may want to begin transitioning toward alternative contractual protections, such as confidentiality or non-solicitation agreements​​.

How Long Must the Employee Remain at the Company?

There is a common question as to how long the employee must remain at the employer before the employer can enforce such an agreement. Generally, Wisconsin will review such issues on a case-by-case basis, as the state court has previously found such non-compete agreements to be unenforceable due to the fact that the employee didn’t work for the company for a long period of time or the employee being forced into the non-compete agreement was being treated unfairly as other similarly situated employees were not forced into such an agreement.

When reviewing these types of cases, the court will look to the following factors:

  • The size of the company, i.e., how many employees
  • If the agreement is used for all employees
  • The type of business, i.e., industry
  • How long the non compete agreement prohibits the move to a competitor
  • What geographical restrictions apply
  • Whether consideration exists in the non-compete agreement

Wisconsin has a statute that covers such non-compete clauses (Section 103.465). The statute specifically indicates that, if the non-compete agreement is reasonably necessary to protect the employer and the scope of the agreement is reasonable in both geographical location and time restrictions, then it will be enforceable.

Consideration and Timing of Non-Compete Agreements

Under Wisconsin law, a non-compete agreement must be supported by adequate consideration. This means the employee must receive something of value in exchange for agreeing to the restriction.

For new hires, the job offer itself typically serves as valid consideration. For existing employees, continued employment is not always enough. Employers are encouraged to provide additional benefits, such as:

  • A promotion or raise
  • A signing bonus
  • Access to specialized training or proprietary information

Additionally, timing matters. Presenting a non-compete agreement after the employee has already accepted a job without informing them earlier may undermine enforceability. Courts may view such practices as coercive or deceptive, particularly if the employee is pressured to sign under threat of termination​​.

Enforceability of a Non-Compete Agreement

In addition to the above-mentioned factors, Wisconsin courts will look to the following five factors when determining whether or not the contract is enforceable:

  • The agreement must be necessary to protect the employer.
  • The contract must state a reasonable time restriction, i.e., one-year is usually the maximum period of time.
  • The contract must have a reasonable geographic restriction.
  • The contract cannot be too broad.
  • The contract must not violate public policy.

With regard to the above factors, the agreement itself must be necessary to protect the employer. Furthermore, the time restriction must be reasonable. If the employer tries to prevent its former employee from going to a competitors for a period of more than one year, that will usually not be enforceable. Most employers who have such agreements generally have a time restriction of between three months to one year.

The employer must be careful when placing restrictions on where the employee can go. For example, if the employee is leaving the telecommunications company to go work for a competitor that is located 100 miles away, then the former employer cannot prevent such movement. However, if the competitor is located down the street, then this would likely be a geographical restriction identified in the non-compete agreement.

The contract cannot be too broad. An example of this would be if the employer wants to prevent its employee from working for any other telecommunications company in the state of Wisconsin.

The contract itself cannot contradict public policy. For example, let’s assume a veterinary surgeon wants to leave the current vet’s office to go work for another vet that is located 10 miles away. There is currently no other veterinary surgeon operating within a 50-mile radius. But the agreement indicates that the surgeon cannot work in a competitor’s office within a 50-mile radius. This would simply contradict public policy, and therefore, the agreement would not be enforceable.

Lastly, the Wisconsin courts will always look for consideration of some kind in the agreement. Therefore, there must be some type of benefit provided to the employee in exchange for the employee’s agreement to sign the contract. An example of consideration in this situation would be the employer’s promise to continue employing the person for signing the agreement. Therefore, if the employee fails to sign the non-compete agreement, his or her employment would end.

Alternatives to Non-Compete Agreements

Given the strict scrutiny of non-competes in Wisconsin and the potential for a federal ban, employers are increasingly turning to alternative protections that are more likely to be upheld in court. These include:

  • Non-Solicitation Agreements: Prevents former employees from soliciting the company’s clients or employees.
  • Confidentiality Agreements: Protects proprietary and trade secret information, regardless of where the employee works afterward.
  • Training Repayment Agreements: Requires employees to reimburse the employer for specialized training if they leave within a certain timeframe.

These tools can often provide sufficient protection for business interests without running afoul of Wisconsin’s statutory and judicial limitations on non-compete clauses​.

Judicial Trends and Blue-Pencil Rule in Wisconsin

Wisconsin courts apply a strict standard when evaluating non-compete clauses and do not follow the “blue-pencil rule,” which would allow a court to rewrite or modify overbroad provisions. Instead, if any part of the non-compete is found to be unreasonable, the entire agreement is rendered unenforceable.

This approach reflects the state’s pro-employee stance on restrictive covenants and underscores the importance of carefully drafting agreements from the outset. Businesses should ensure:

  • Narrow tailoring to only what is necessary to protect legitimate business interests.
  • Avoiding catch-all clauses that prohibit competition beyond reasonable scopes.
  • Documentation of justification, such as the role's access to trade secrets or customer relationships.

Employers who fail to do this risk having the entire agreement invalidated, even if only one provision is problematic​​.

Frequently Asked Questions

  1. Are non-compete agreements legal in Wisconsin in 2024?
    Yes, they are legal but must meet strict statutory requirements under Wis. Stat. § 103.465 to be enforceable.
  2. Will the FTC’s proposed rule end all non-compete agreements in Wisconsin?
    If enacted and upheld, the FTC’s rule would broadly prohibit non-competes nationwide, with few exceptions. Legal challenges could delay or alter its implementation.
  3. What is considered valid consideration for a non-compete in Wisconsin?
    For new employees, the job offer suffices. For current employees, additional compensation or benefits are usually necessary.
  4. Can Wisconsin courts modify an overly broad non-compete agreement?
    No. Wisconsin courts do not “blue-pencil” agreements. If any part is unreasonable, the entire agreement may be invalidated.
  5. What are safer alternatives to non-competes for employers?
    Non-solicitation, confidentiality, and training repayment agreements are often better options for protecting business interests.

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