In Wisconsin, post-employment restrictive covenants are governed by Wis. Stat. § 103.465, requiring that any restrictive covenant be reasonable to be enforceable.1
Articles Discussing Restrictive Covenants In Wisconsin.
There are so many stories about restrictive covenants being unenforceable in Wisconsin that it is refreshing to see a case where a restrictive covenant is enforced – especially at the preliminary injunction stage.
Analyzing an anti-poaching agreement as a non-compete agreement, a Wisconsin Court of Appeals has confirmed that a former employee’s agreement not to solicit other employees may be void and unenforceable if it is too broad. The Manitowoc Company v. Lanning, No. 2015AP1530 (Wis. Ct. App. Aug. 17, 2016). The decision offers an analysis for determining when an anti-poaching agreement goes beyond protecting the employer’s legitimate interests and becomes an unreasonable restraint of trade.
Wisconsin has firmly joined the majority of jurisdictions in the United States that hold that continued employment constitutes lawful consideration sufficient to enforce a restrictive covenant with a current at-will employee. The Wisconsin Supreme Court’s decision in Runzheimer International, Ltd. v. Friedlen and Corporate Reimbursement Services, Inc., 2015 WI 45 (Wis. 2015), is a victory for Wisconsin employers and marks the end of years of debate on this issue.
On April 30, 2015, the Wisconsin Supreme Court issued its long-awaited decision in Runzheimer Int’l, Ltd. v. Friedlen, settling a dispute in Wisconsin over whether continued employment alone was sufficient to bind an employee to a non-compete agreement. The case involved an important, if nuanced, distinction between (a) whether there is a legal “agreement” in the first place and (b) whether that legal agreement is enforceable. If there is no legal agreement, then there is nothing to enforce. If there is a legal agreement, the question becomes whether the restrictions themselves are enforceable (based on their reasonableness, etc.). The former question was addressed in Runzheimer.
The Wisconsin Court of Appeals has asked the Wisconsin Supreme Court for “guidance” as to whether additional consideration is required to support a covenant not to compete entered into during an at-will employment relationship. The case, Runzheimer International, LTD v. Friedlen, involves an action by Runzheimer International, Ltd to enforce a non-compete agreement signed by David Friedlen in 2009, after Friedlen had been working at Runzheimer as an at-will employee for nearly 20 years. Signing the agreement was made a condition of Friedlen’s continued employment and his participation in the company’s yearly incentive plan. The agreement did not increase Friedlen’s salary, nor did it make him eligible for incentives that he had not been eligible for prior to signing the agreement. The trial court found that the non-compete was invalid because it lacked sufficient consideration. Runzheimer appealed, arguing that there should be no difference in how courts treat restrictive covenants entered into at the start of employment and those entered into after years of employment, because “every day is a new day both for employer and employee in an at-will relationship.”