Millions of workers nationwide have been presented with non compete agreements, with nearly one in five bound by a covenant to not compete. That’s around 30 million employees currently bound by an agreement nationwide, with many currently in place in Wisconsin. However, not all non compete agreements are enforceable. Wisconsin has laws in place regarding the validity and enforceability of non compete agreements
What is a Covenant to Not Compete?
A covenant to not compete, or non compete agreement, is a legal contract between an employee and his or her employer. The purpose of the covenant is to prevent an employee from leaving a job and entering into competition with the employer. Some agreements are unreasonably restrictive under the guise of protecting trade secrets or a company’s interest; for instance, past agreements have restricted an employee’s ability to work within his or her industry or geographical location. Such agreements are often invalidated under Wisconsin law. It can be difficult to determine whether a non compete agreement is valid, and you should consult with a business law attorney before drafting or signing a contract.
Non Compete Agreements in Wisconsin
Currently, the only enforceable covenants to not compete in Wisconsin are those that could be considered reasonable. What’s reasonable may be different to different people, but essentially the laws state that non compete agreements can’t impose an unreasonable restriction on its employees. For example, a non compete agreement in which restricts an employee from working for a competitor indefinitely cannot be enforced. Similarly, covenants without a specific geographical restriction are illegal in Wisconsin. There are different rules within the same industry depending on the profession of the employee, but despite the nature of the agreement, Wisconsin generally favors the worker.
Valid non compete agreements must be in place for the sole protection of the employer, not to discourage employees from seeking other employment opportunities. Wisconsin is one state that gives more protection to workers from covenants to not compete; however, workers can soon enjoy even more freedom from non compete agreements thanks to a recent ruling from the Federal Trade Commision (FTC).
Does the FTC’s Ban on Non Compete Agreements Apply in Wisconsin?
The FTC’s decision to ban noncompete agreements applies to all industries across the country, a ruling that declares covenants to not compete to be an unfair form of competition. That means that, as of April 23, 2024, existing non compete agreements in Wisconsin will be totally unenforceable 120 days after the ruling with the exception of existing agreements for senior executives. The purpose of the ban is to encourage innovation and business growth with an expected 8,500 new businesses per year that would otherwise not exist. It also
How can businesses handle the new ban on non compete agreements? For starters, each business must notify its employees who have a valid non compete in place that the agreement is no longer enforceable. If a current covenant is in place with a senior-level executive, the business should evaluate whether the agreement will be enforceable or not after the FTC’s ruling comes into effect.
Contact a Wisconsin Business Law Attorney to Evaluate Your Case
Wisconsin’s laws surrounding non compete agreements can be complex. To understand whether your covenant to not compete is currently enforceable or will be enforceable in the future, it’s best to consult with a skilled Wisconsin lawyer. Contact Attolles Law, S.C. to discuss your