As an employer, understanding noncompete agreements is important
As a Wisconsin employer, you may have an interest in entering into noncompete agreements, or restrictive covenants, with employees to protect your business interests. A noncompete agreement can restrict an employee from taking part in certain activities after their employment with you ends. These agreements, by necessity, are often specific to geographical areas or industries related to that of their employer. These contracts can prevent an employee from working for a competitor for a length of time after they leave, which can be an important consideration for protection of proprietary or confidential information, customer contacts, or when the employee provides a unique or particularly valuable skill.
Noncompete agreements must, of course, be enforceable to be effective. But how can you attempt to make sure your noncompete agreement is enforceable in Wisconsin? Here's what you need to know.
Understanding enforceability of a noncompete agreement
As an employer, a noncompete agreement must be in place for reasons beyond simply wanting to prevent an employee from taking their skills to a competitor. In Wisconsin, noncompete agreements can be challenging to enforce. The state legislature passed a law making noncompete agreements unenforceable unless, "…the restrictions imposed are reasonably necessary for the protection of the employer or principal." Examples of enforceable agreements include those that protect customer contacts, trade secrets and other confidential information.
In Wisconsin, courts consider several factors when determining whether a noncompete contract can be enforced.
- They must be limited to a specific geographical area.
- They may only be in effect for a limited amount of time, typically up to a year.
- They cannot restrict an employee’s ability to earn a living or be unduly oppressive to the worker.
- They must be reasonably necessary to protect the employer. (This is why it’s smart to establish the interests you wish to protect in the agreement.)
- They cannot contradict public policy.
Developing a noncompete agreement that’s reasonable and reasonably necessary can be challenging when laws aren’t definitive. Working with an attorney who is an expert in employment law is essential to developing policies for your business that comply with state and federal laws. In the long run, this protects your business and gives you the peace of mind that your noncompete agreements are enforceable.
Developing a noncompete agreement? Consult an attorney.
When it's time to develop restrictive covenants, employment policies and employment handbooks for your La Crosse-area business, we can help. Our attorneys are also experts in hiring, discipline and termination issues as well as compliance with state and federal laws and workers compensation matters. Contact us to learn more about how our attorneys in the 7 Rivers Region can assist with noncompete agreements and other legal needs of your organization.
For more information about noncompete agreements and other employment laws, register now for our 2021 Employment Law Seminar: Navigating Constant Change scheduled for Tuesday, October 26. Open to Greater La Crosse Area employers. No cost, but registration is requested by October 21. Find more information and register at https://www.johnsflaherty.com/blog/navigating-constant-change-employment-law-in-2021.
By Joe Veenstra, Employment Law Attorney in La Crosse, WI. For more information on noncompete agreements, contact him at 608-784-5678.