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Wisconsin non-compete make over: Legislation introduced to overhaul Wisconsin's restrictive covenant statute

March 10, 2015

On March 5, 2015, Senator Paul Farrow of Waukesha County introduced 2015 Senate Bill 69: legislation that would repeal and recreateWisconsin Statute 103.465, the law that governs restrictive covenant agreements in the state (commonly known as non-compete agreements).  A copy of the proposed bill can be found here.

The proposed revised statute applies to restrictive covenants between employees or agents and employers or principals.  The following are a few highlights:

  • The proposed law would expressly exclude certain confidentiality agreements and certain employee non-solicitation agreements from the definition of a “restrictive covenant.”
  • The proposed law would require courts to find that a restrictive covenant agreement is supported by sufficient consideration if the agreement:
  • Is signed at the beginning or near the beginning of the employment relationship and employment is contingent on signing the agreement;
  • Provides the employee consideration of any value acceptable to an employee that is above and beyond that due to the employee under the terms of some other agreement or promise; or
  • Offers the employee monetary consideration; a bonus; additional paid time off; access to a bonus or incentive program or pool; continuation of employment at a rate of pay and benefits the same as or more than those received by the employee before execution of the agreement if continued employment is contingent on signing the agreement; or garden leave (defined by the statute).
  • The bill expressly defines “legitimate business interest” and sets forth the factors a court shall consider when determining whether a restraint is reasonable, including rebuttable presumptions that a court is required to apply.
  • Courts would likely be permitted to modify restrictive covenants to make them reasonable.If passed, the revised statute will apply to agreements executed on or after the enactment of the new law.

The aforementioned changes would represent a new era of restrictive covenants in Wisconsin, overturning prior court precedent and providing clarification and guidance where there was previously uncertainty.  More importantly, the proposed law would likely make enforcement of restrictive covenant agreements more likely, an effect that generally benefits employers.

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