It has become increasingly common for employers to attempt to limit an employee’s post-employment opportunities through the use of non-compete agreements. While non-compete agreements are disfavored by the law, a properly drafted non-compete agreement can be legally enforceable. These agreements often contain substantial volumes of “legalese,” that may significantly affect your career, livelihood, and reputation, and may even restrict your ability to secure future employment.
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These agreements are usually prepared by the employer’s attorneys and, predictably, drafted in a manner that is favorable to them. Therefore, it’s critical to carefully consider the legal and practical implications before signing and/or obtaining competent legal advice. In many cases, the agreements actually contain language that specifically instructs the employee to seek legal counsel before signing the agreement. Such language may be a key indicator that the agreement is drafted in a manner that is favorable to the employer, and not to you.
What is a Non-Compete Agreement?
A non-compete is a contractual agreement between employer and employee that restricts the employee’s ability to engage in activities that are competitive to the employer’s interests. Among other things, these agreements may limit an employee’s ability to accept alternative employment, from soliciting the employer’s customers and other limitations that restrict an employee’s ability to perform or accept certain work in the future. These agreements may be enforceable both during the employment relationship and after if ends (whether the employee quits or is terminated), so it is important for the employee to understand the restrictions before signing and/or consult with an attorney.
How Do I know if I have a non-compete?
Employers often require an employee to sign a non-compete as a condition of new or continued employment. Therefore, it is not uncommon for an employer to slip a non-compete agreement into a broader employment contract or new-hire paperwork. Since these agreements necessarily restrict an employee’s employment opportunities, it is critical to (1) carefully review these documents to determine whether a non-compete agreement is included and (2) evaluate the legal and practical limitations of the terms before signing by reviewing the law and/or obtaining competent legal advice.
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In Wisconsin, non-compete agreements are only enforceable if the restriction is reasonable. In other words, if you signed (or are being asked to sign) a non-compete that includes language that is too broad or restrictive, it may be the case that it is unreasonable and therefore unenforceable. Under Wisconsin law, a non-compete is only enforceable if the covenant (1) is necessary to protect the employer’s legitimate interests, (2) provides a reasonable time restriction, (3) provides a reasonable territorial restriction, (4) is not harsh or oppressive to the employee and (5) is not contrary to public policy. Each part of this five-part test has been further developed/defined by the courts, so it is important to closely review the law and/or consult with an attorney to determine whether the non-compete passes muster and is enforceable.
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