May 2015
By: Alan E. Seneczko, Esq.
By: Alan E. Seneczko, Esq.
Any employer
that has ever desired to utilize a non-compete agreement in Wisconsin has
asked, “is continued employment sufficient consideration in order for the
agreement to be enforceable?” – only to be met with, “well… the law on that
point is not clear.” Not anymore.
On April 30,
2015, the Wisconsin Supreme Court finally answered this question, holding that
an employer’s forbearance in exercising its right to terminate an at-will
employee constitutes lawful consideration for signing a restrictive covenant.
In Runzheimer International, Ltd. v.
Friedlen, 2015 WI 45, an employer required all of its employees to sign a
non-compete agreement or be fired. The employee signed the agreement, worked
for two years, was terminated, and then went to work for a competitor in
violation of the agreement. When the employer sued to enforce the agreement, the
employee argued that it was not enforceable because the employer retained its
right to terminate him at will – meaning it essentially gave up nothing in
exchange for his promise not to compete. The court disagreed, finding that
continued employment was indeed valid consideration for the agreement. In other
words, as long as the employee’s continued employment was conditioned on
executing the agreement, additional monetary or other consideration was not
required in order for the agreement to be enforceable.
On another
front, the Wisconsin Legislature is now considering substantial revisions to Wis.
Stat. §103.465, the Wisconsin statute that governs (and limits) the
enforcement of non-compete agreements. 2015 Senate Bill 69, which is currently
pending in committee, proposes to repeal and recreate the existing statute in a
manner that enhances the likelihood that such agreements will be enforceable –
if drafted properly. For example, the new statute would define the
consideration necessary for an agreement to be enforceable; exempt agreements
that do not restrict competition (e.g., confidentiality agreements); create a
rebuttable presumption of reasonableness for any restrictions lasting 6 months
or less (and unreasonableness for 2 years or more); and, clarify the “legitimate
business interests” that are necessary to justify an agreement. Although the
Governor has much on his plate these days, the chances of this bill passing are
good. Stay tuned.
Questions? Please
contact WS Attorney Alan E. Seneczko at (262) 560-9696, or email alseneczko@wesselssherman.com.
