I recently reported that Michigan, which broadly permits non-compete agreements, is considering a bill that would severely restrict them. Now the inverse scenario is taking place in Wisconsin. Wisconsin is one of the more challenging states for enforcing non-compete agreements. A recent bill would clarify and relax the requirements for non-compete agreements under Wisconsin law.
Wisconsin Senate Bill 91 would "repeal and recreate" Section 103.465 of the Wisconsin Statutes. Among the bill's provisions:
As we have discussed at some length, a major issue in non-compete law is whether continued employment is sufficient consideration to support a non-compete agreement entered into after the employment relationship has commenced. Wisconsin law appears unsettled (though some courts have held that continued employment is not sufficient), and as we noted, the issue is currently under review by the Wisconsin Supreme Court. Under Senate Bill 91, continued employment is clearly sufficient. The bill states that a court shall find valid consideration where (among other things) "[c]ontinuation of the employment or agency relationship at a rate of pay and benefits that is equal to or greater than the pay and benefits received before the execution of the restrictive covenant, if continuation of the employment or agency relationship is contingent on execution of the restrictive covenant."
In Wisconsin, unlike in many other jurisdictions, courts will not "blue pencil" an overly broad agreement -- that is, courts will not strike provisions or otherwise reform the agreement to make it enforceable. Under the bill, not only would a court be allowed to blue pencil an overly broad restrictive covenant agreement, but would actually be required to do so. The bill states: "If the restraint is overbroad, overlong, or otherwise not reasonably necessary to protect the legitimate business interest, the court shall modify the restraint and grant only such relief as is reasonably necessary to protect that legitimate business interest."
The bill also includes a mutual attorney fees provision. The bill provides that, if an agreement does not contain an attorney fees provision, "a court may award costs and attorney fees to the prevailing party." The attorney fees provision, if enacted, would provide a potential tactical advantage but also potential risk for those seeking to enforce a non-compete.
We will of course monitor and report on any significant developments. The text of Wisconsin Senate Bill 9 can be viewed here.