United States: Wisconsin Legislature Proposes Joining Other States In Ban Of Non-Compete Agreements

On October 12, 2023, the Wisconsin legislature introduced Assembly Bill 481, which proposes the ban of employee non-compete agreements in the Badger State. Currently, employee non-compete agreements in Wisconsin are allowed if limited to a specified territory, a specified time, and only if the "restrictions imposed are reasonably necessary for the protection of the employer or principal." Wis. Stat. § 103.465. AB 481 would amend current law to make any post-employment non-compete agreement void, except if used to prohibit or restrict the unauthorized use of a customer list or intellectual property owned or licensed by the employer or principal.

Under existing law, non-solicitation covenants are also considered restraints on trade governed by Wis. Stat. § 103.465. See, e.g., Manitowoc Co., Inc. v. Lanning, 379 Wis. 2d 189 (2018). While AB 481 would amend Section 103.465 to address "Covenants not to compete" instead of "Restrictive covenants," Wisconsin courts have taken an expansive view as to what types of restraints are "non-competes," and it is possible that courts would continue to apply Section 103.465 to not only explicit non-competes, but other forms of restraints. If so, employee and customer non-solicits would be similarly limited only to protect the "unauthorized use of a customer list" or the "unauthorized use of "intellectual property."Presumably, the proposed legislation will not affect the enforceability of restrictive covenants used in the sale of a business transaction because the legislation is targeted to "covenants not to compete in employment contracts." However, restrictive covenants used in equity grants, severance agreements and other forms of employment-related agreements face an uncertain future.For employers in Wisconsin, while ultimate enactment of AB 481 is highly uncertain, it would not apply retroactively and no amendments of existing agreements will be necessary.We will monitor this legislation and update accordingly.

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