Wisconsin restrictive covenant agreements commonly include non-compete, non-solicitation (of customers, clients, and employees), and non-disclosure or confidentiality (NDA) provisions. These are legally classified as restraints on competition and are enforceable provided they are reasonably necessary to protect the employer’s legitimate business interests.
Standard Provisions in Restrictive Covenant Agreements
Non-compete agreements prohibit former employees from working for competitors, launching rival ventures, or performing similar roles within a defined geographic area and timeframe. Such agreements must be designed to protect legitimate business interests—including trade secrets, confidential information, and customer goodwill—rather than simply restricting fair post employment competition.
Non-solicitation agreements prohibit former employees from soliciting a company’s clients, prospective customers, or staff members. Customer-focused clauses are common and typically more enforceable when limited to specific relationships the employee managed, such as a salesperson’s established client base within an assigned territory.
Non-disclosure and confidentiality agreements prohibit the use or disclosure of an employer’s proprietary information—such as trade secrets, customer lists, pricing, and internal processes—both during and after employment. Notably, even standard confidentiality provisions may be classified as restrictive covenants if they effectively limit an individual’s professional activities post-employment.
Other common related terms include non-disparagement clauses.
Agreements may be documented in offer letters, employment contracts, employee handbooks (subject to formal acknowledgment), or severance packages. Valid agreements typically require “consideration,” which for new hires is the job offer itself, and for existing employees may include a raise, bonus, continued employment, or other benefits.
The Enforceability of Restrictive Covenants in Wisconsin: The Five-Factor Test
Under Wisconsin law, a restrictive covenant is enforceable only if the restrictions are reasonably necessary to protect the employer. Courts evaluate these agreements using a five-factor test:
1. Necessary for the protection of a legitimate employer
2. Reasonable time period
3. Reasonable geographic area, customer list, or other identifiable scope
4. Not unreasonable/harsh/oppressive to the employee
5. Not unreasonable/injurious to the general public
When asked to sign a restrictive covenant as part of a job offer, many candidates ask if there is any room for negotiation to retain maximum flexibility in the future. The fact is that employers can generally condition employment or continued employment on signing, and, refusal may mean losing or not getting the job. However, it is possible to collaborate with the employer to narrow the scope:
– Consult a seasoned employment attorney with expertise in non-compete agreements to review the proposed employment agreement to ensure its language is not overly broad in scope.
– Negotiate terms where possible by requesting a shorter duration of enforceability and narrowing geographical or customer restrictions to accounts the employee directly manages. Ensure confidential information is clearly defined to exclude general skills and public knowledge, seek carve-outs for specific roles or circumstances, and request additional consideration, such as enhanced severance packages or benefits.
– Evaluate the potential impact of signing the agreement in its current form on future professional opportunities, particularly for those operating within specialized industries or niche markets.
– Explore considerations such as an enhanced severance package or additional benefits.
For executives, sales professionals, and roles involving trade secrets or key customer relationships, it is highly recommended to tailor restrictive covenant agreements with an experienced employment law attorney. This is particularly vital in industries such as manufacturing, technology, healthcare, and professional services, where protectable interests often vary significantly.
Frequent Post-Employment Disputes
Disputes frequently arise when former employees join competitors, launch competing businesses, solicit former clients, or are accused of misappropriating confidential information. Common issues include:
• The enforceability of the covenant under the five-factor test.
• The distinction between active solicitation and passive business acceptance, and the differentiation between general professional knowledge and protected proprietary information.
• Injunctive relief (temporary restraining orders or preliminary injunctions to prevent competition), monetary damages, and forfeiture claims.
The employer bears the burden of proving reasonableness; courts apply strict scrutiny and generally favor employee mobility.
Case outcomes often hinge on the specific details of the employee’s role, the employer’s legitimate protectable interests, and the precision of the legal drafting.
Consult an experienced employment law attorney to review your employment package.
Reviewing your employment agreement with an experienced attorney before signing is the best way to maximize your benefits, prevent future career restrictions and future employment disputes. Protect your professional interests by contacting the employment law experts at Alan C. Olson & Associates for immediate assistance at 262-785-9606.
