Being Reasonable: The Key to an Enforceable Non-Compete Agreement

Many employers now ask employees to sign non-compete agreements as a way to protect business interests. But having a non-compete you can actually enforce is easier said than done.

Wisconsin law requires non-compete restrictions to be “reasonably necessary for the protection of the employer.” It sounds simple, but in practice, courts interpret non-competes in favor of employees.  That means a lot of agreements aren’t enforced because they’re too restrictive.

There’s no guarantee your non-compete agreement will be enforced, but there are things you can do to increase your chances:

  1. Decide ahead of time what the business reasons are for having a non-compete (protecting a customer base or confidential information, for example). You’ll need those reasons if the agreement is challenged, but thinking about them first can also help you tailor the agreement to protect them better.
  2. Limit restrictions to a definite time period. What’s “reasonable” will depend on your situation, but usually it’s no more than 2 years.
  3. Limit restrictions to a definite geographical area. Again, this depends on the situation, but the area should be related to your business presence, like the area you advertise in and draw most of your customers from.
  4. Use non-competes as part of a policy, not based on individual employees. If you ask one person in a position to sign one, ask everyone in that position to sign one.

And most importantly:

5. Talk to a lawyer at the beginning. The law on non-competes is constantly changing. A lawyer will tell you where the law stands and how to write the agreement so it’s most likely to be upheld.

A non-compete agreement is useful only if it’s enforceable.  Take the time to plan your agreement so that you have the best chance of success.

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