Employee Non-Compete Agreement and Enforceability Memo — Wisconsin

WISCONSIN Employee Non-Compete Agreement and Enforceability Memo

Quick-Reference Summary

PART A — ENFORCEABILITY MEMO

MEMORANDUM

TO: [CLIENT / EMPLOYER]
FROM: [ATTORNEY]
DATE: [__/__/____]
RE: Enforceability of Employee Restrictive Covenants Under Wisconsin Law (Wis. Stat. § 103.465)
PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / WORK PRODUCT

I. Executive Summary

Wisconsin is the most punishing common-law jurisdiction for non-competes. Wis. Stat. § 103.465, enacted in 1957 expressly to overrule prior Wisconsin Supreme Court decisions adopting the "blue pencil" doctrine, provides that any restrictive covenant containing any unreasonable restraint is void in its entirety — even as to the reasonable portions. Courts have no authority to modify, rewrite, or reform. The only structural mitigation is the divisible-covenant doctrine recognized in Star Direct v. Dal Pra, 2009 WI 76, which permits a court to enforce separately understandable, independently protective covenants when located alongside an unenforceable one. Drafting in Wisconsin must therefore be conservative, narrow, severable, and free of any "kitchen sink" over-inclusion that could nullify the entire restrictive scheme.

II. Wis. Stat. § 103.465

The statute reads, in pertinent part:

"A covenant by an assistant, servant or agent not to compete with his or her employer or principal during the term of the employment or agency, or after the termination of that employment or agency, within a specified territory and during a specified time is lawful and enforceable only if the restrictions imposed are reasonably necessary for the protection of the employer or principal. Any such restrictive covenant imposing an unreasonable restraint is illegal, void and unenforceable even as to any part of the covenant or performance that would be a reasonable restraint."

(Emphasis added.) The statute applies to all post-employment restrictions, not just classic non-competes. The Wisconsin Supreme Court has held § 103.465 applies to:

• Non-competes
• Customer non-solicits
• Employee non-solicits (Manitowoc Co. v. Lanning, 2018 WI 6)
• Forfeiture-for-competition provisions in pension/profit-sharing plans (Holsen v. Marshall & Ilsley Bank, 52 Wis. 2d 281 (1971))

III. Reasonableness — Five-Factor Test

A restrictive covenant is enforceable only if:

1. The restriction is reasonably necessary for the employer's protection;
2. The duration is reasonable;
3. The geographic scope is reasonable;
4. The restriction is not harsh or oppressive to the employee;
5. The restriction is not contrary to public policy.

Failure on any single factor voids the entire covenant.

IV. Divisible-Covenant Doctrine — Star Direct v. Dal Pra

In Star Direct, Inc. v. Dal Pra, 2009 WI 76, the Wisconsin Supreme Court permitted a court to enforce separately understandable restrictive covenants even when located in the same agreement as a void covenant, provided each covenant:

• Protects a distinct interest;
• Is independently understandable and capable of being enforced separately; and
• Does not rely on the void covenant for its meaning.

This is NOT a reformation power. The court still cannot rewrite a single overbroad covenant. Star Direct permits independent enforcement of clauses that have always stood as separate, divisible promises.

V. Consideration — Runzheimer v. Friedlen (2015)

New hires: Initial offer of employment is sufficient.

Mid-employment: Wisconsin previously required additional consideration. Runzheimer Int'l, Ltd. v. Friedlen, 2015 WI 45, held that continued at-will employment is sufficient consideration if (and only if) the employer expressly conditions continued employment on signing and would actually terminate the employee for refusing. Without that conditioning, the agreement may fail for lack of consideration (NBZ, Inc. v. Pilarski, 185 Wis. 2d 827 (Ct. App. 1994)).

Best practice: Provide some additional consideration (bonus, raise, equity grant, promotion) for mid-employment agreements. It is cheap insurance and eliminates the conditioning-documentation problem.

VI. Customer Non-Solicitation

A customer non-solicit must be limited to customers with whom the employee had material contact or about whom the employee had access to confidential information during a defined look-back period. "All customers" language voids the entire covenant. Prospective-customer restrictions likewise must be narrowly tailored.

VII. Employee Non-Solicitation — Manitowoc v. Lanning

Manitowoc Co. v. Lanning, 2018 WI 6, confirmed that employee non-solicits are subject to § 103.465. A clause prohibiting solicitation of "any" employee was void because it covered employees who posed no realistic competitive threat. A valid employee non-solicit must be limited to employees who (a) had access to confidential information, (b) possessed unique skills or knowledge, OR (c) held positions creating realistic competitive risk if poached.

VIII. Choice of Law

Wisconsin courts apply § 103.465 to Wisconsin employees notwithstanding a contractual choice-of-law clause selecting another state's law (public-policy override). Drafting under another state's law to evade § 103.465 will fail.

IX. Trade Secrets

The Wisconsin Uniform Trade Secrets Act, Wis. Stat. § 134.90, provides parallel protection independent of contract. Trade-secret remedies survive even if the restrictive covenant is void.

X. FTC Non-Compete Rule Status

Vacated nationwide by Ryan LLC v. FTC (N.D. Tex. Aug. 20, 2024). FTC abandoned appeal Sept. 5, 2025. Not in effect.

XI. Drafting Recommendations

☐ Draft each restrictive covenant as a completely separate, severable, independently understandable clause (per Star Direct).
☐ No "kitchen sink" — over-inclusion that exceeds reasonable necessity voids the entire covenant.
☐ Limit duration to 6–12 months (1 year is common ceiling).
☐ Tailor geography to the area where the employer has actual goodwill / employee had material contact.
☐ Customer non-solicit: limit to customers Employee had material contact with in last 12 months.
☐ Employee non-solicit: limit to employees with confidential information / unique skills / competitive risk (NOT "any employee" per Lanning).
☐ Document conditioning for mid-employment agreements (memo to file: "Employee was advised continued employment was conditioned on signing; refusal would have resulted in termination") OR provide additional consideration.
☐ Pair with Wisconsin-law NDA (separate document) and invention assignment.
☐ Use Wisconsin choice of law and venue.
☐ Avoid step-down provisions that could be construed as "alternative" overbroad restrictions — instead, draft a single, narrow, defensible restriction.

CAUTION ON STEP-DOWNS: Step-down provisions ("12 months; if unenforceable, 6 months") that work in reformation jurisdictions are dangerous in Wisconsin. A court will not pick the shorter alternative as a reformation. The safer Wisconsin practice is to draft one narrow restriction and rely on the divisible-covenant doctrine across separate covenants (not across alternative scopes within one covenant).

PART B — NON-COMPETE AGREEMENT (§ 103.465-CONSCIOUS)

THIS RESTRICTIVE COVENANT AGREEMENT (this "Agreement") is entered into as of [__/__/____] (the "Effective Date"),

by and between:

EMPLOYER:
Name: [________________________________]
Address: [________________________________]
City/State/ZIP: [________________________________]
(the "Company")

and

EMPLOYEE:
Name: [________________________________]
Address: [________________________________]
City/State/ZIP: [________________________________]
Position: [________________________________]
(the "Employee")

RECITALS

WHEREAS, the Company is engaged in the business of [________________________________] (the "Business");

WHEREAS, Employee will have or has had access to specifically identified trade secrets, Confidential Information, and Customer relationships that are necessary to protect with the specific, narrowly tailored covenants set forth below;

WHEREAS, this Agreement is intended to comply with Wis. Stat. § 103.465 and to be enforceable as separately understandable, divisible covenants under Star Direct, Inc. v. Dal Pra, 2009 WI 76;

NOW, THEREFORE, the Parties agree:

SECTION 1 — DEFINITIONS

1.1 "Confidential Information" means specifically identified non-public information of the Company, including [pricing models, customer lists, business plans, technical specifications, financial data, vendor terms] [________________________________]. Consistent with Wis. Stat. § 134.90.

1.2 "Customer" means any person or entity that (a) was a customer of the Company during the twelve (12) months preceding Employee's termination AND (b) with whom Employee had material contact OR about whom Employee had access to Confidential Information.

1.3 "Restricted Period" means the period commencing on Employee's cessation of employment for any reason and continuing for twelve (12) months (or another period not to exceed one year, as specified).

1.4 "Geographic Area" means [tailored description of area where Employee actually worked, had Customer contact, or accessed Confidential Information during the last 12 months — NOT a broader area] [________________________________].

1.5 "Restricted Activities" means engaging in services for a Competing Business that are substantially identical to the services Employee actually performed for the Company during the twelve (12) months preceding termination.

1.6 "Competing Business" means [a business providing the specific products/services the Company sells in the Geographic Area] [________________________________].

SECTION 2 — INDEPENDENT, SEVERABLE COVENANTS

DRAFTER'S NOTE — DIVISIBILITY: Each covenant below is a SEPARATE, INDEPENDENT, SEVERABLE promise protecting a DISTINCT interest. Under Star Direct v. Dal Pra, 2009 WI 76, even if one covenant is held void under Wis. Stat. § 103.465, the remaining independent covenants shall remain in full force and effect. Each is drafted to be independently understandable without reference to the others.

2.1 Non-Competition (Distinct Interest: Trade Secrets / Direct Competitive Use).

During the Restricted Period, Employee shall not engage in the Restricted Activities for a Competing Business within the Geographic Area.

2.2 Customer Non-Solicitation (Distinct Interest: Customer Goodwill and Relationships).

During the Restricted Period, Employee shall not directly or indirectly solicit, divert, or accept business from any Customer (as narrowly defined in Section 1.2).

2.3 Employee Non-Solicitation (Distinct Interest: Workforce Stability re: Key Personnel).

During the Restricted Period, Employee shall not directly or indirectly solicit for employment any employee of the Company who, during the 12 months preceding Employee's termination, (a) had access to the Company's Confidential Information; OR (b) held a position involving material customer-relationship responsibilities OR specialized skills that pose realistic competitive risk if poached.

DRAFTER'S NOTE: Per Manitowoc Co. v. Lanning, 2018 WI 6, an employee non-solicit covering "any" employee is void under § 103.465. § 2.3 is intentionally narrow to comply.

2.4 Confidentiality (Distinct Interest: Protection of Confidential Information).

Employee shall not, during or after employment, disclose or use Confidential Information for any purpose other than the Company's business.

DRAFTER'S NOTE: Confidentiality obligations may not be subject to § 103.465 to the same degree as competitive restrictions, particularly when limited to true trade secrets and proprietary information, but reasonable scope and duration remain best practice.

SECTION 3 — CONSIDERATION

☐ New Hire: The Company's offer of employment is sufficient consideration.

☐ Mid-Employment, Conditioned on Signing: Continued at-will employment, expressly conditioned on Employee signing this Agreement, with the express understanding that refusal to sign would have resulted in termination (consistent with Runzheimer Int'l, Ltd. v. Friedlen, 2015 WI 45). The Parties acknowledge that the Company would have terminated Employee for refusal to sign. _____ (Company initial) _____ (Employee initial)

☐ Mid-Employment with Additional Consideration (recommended): Employee receives the following independent consideration: [________________________________] (e.g., signing bonus of $[____], salary increase, equity grant, promotion, severance commitment, specialized training).

SECTION 4 — LEGITIMATE PROTECTABLE INTERESTS

The Company has documented legitimate, reasonably necessary protectable interests in (a) trade secrets and Confidential Information specifically identified above; (b) Customer goodwill and relationships developed at the Company's expense; and (c) workforce stability with respect to employees identified in Section 2.3.

SECTION 5 — SEVERABILITY AND DIVISIBILITY

5.1 The covenants in Sections 2.1, 2.2, 2.3, and 2.4 are each separate, divisible, independent covenants protecting distinct interests. If any one covenant is held unenforceable under Wis. Stat. § 103.465, the remaining covenants shall remain in full force and effect, consistent with Star Direct, Inc. v. Dal Pra, 2009 WI 76.

5.2 No Reformation. The Parties acknowledge that Wisconsin courts have no authority to reform or modify an unreasonable restrictive covenant under Wis. Stat. § 103.465. No provision of this Agreement shall be construed as authorizing reformation.

SECTION 6 — REMEDIES

6.1 Employee acknowledges that breach would cause irreparable harm; the Company may seek temporary, preliminary, and permanent injunctive relief in addition to any remedies at law.

6.2 The prevailing party in any action to enforce a covenant in Section 2 shall be entitled to reasonable attorneys' fees and costs to the extent permitted by Wisconsin law.

6.3 The Company's trade-secret remedies under Wis. Stat. § 134.90 are not affected by the enforceability of the covenants in Section 2.

SECTION 7 — GENERAL

7.1 Governing Law. Wisconsin law governs without regard to conflicts principles. The Parties acknowledge that Wis. Stat. § 103.465 applies regardless of any conflicting choice-of-law provision.

7.2 Forum. State and federal courts located in [____ County], Wisconsin have exclusive jurisdiction.

7.3 Entire Agreement; Amendment. This is the entire agreement; amendments require a writing signed by both Parties.

7.4 Assignment. Company may assign to successors; Employee may not assign.

SIGNATURES

COMPANY:

EMPLOYEE:

PART C — PRE-SIGNING CHECKLIST

☐ Restricted Period limited to 12 months or less (longer durations rarely survive § 103.465).
☐ Geographic Area tailored narrowly to Employee's actual footprint in last 12 months; no over-inclusion.
☐ Restricted Activities limited to services Employee actually performed.
☐ Customer non-solicit limited to Customers Employee had material contact with in last 12 months.
☐ Employee non-solicit narrowly tailored to employees with Confidential Information, unique skills, or competitive risk (NOT "any employee" per Lanning).
☐ Each covenant drafted as a separately understandable, independently enforceable, divisible clause (per Star Direct).
☐ NO step-down "alternative" provisions within a single covenant (Wisconsin courts will not reform).
☐ Mid-employment consideration: either (a) memo documenting that continued employment was expressly conditioned on signing AND refusal would have resulted in termination (per Runzheimer), OR (b) additional independent consideration (bonus, raise, equity, promotion).
☐ Wisconsin choice of law and venue.
☐ Paired with separate Wisconsin-law NDA and invention assignment.
☐ Trade-secret protection cross-referenced to Wis. Stat. § 134.90 (WUTSA) as independent remedy.
☐ Reviewed for over-inclusion in every covenant (any single unreasonable element voids the entire covenant).
☐ Copy delivered to Employee for records.

Sources and References

• Wis. Stat. § 103.465 — Wisconsin Legislature
• Star Direct, Inc. v. Dal Pra, 2009 WI 76 — Wisconsin Supreme Court opinion
• Manitowoc Co. v. Lanning, 2018 WI 6 — Wisconsin Supreme Court
• Runzheimer Int'l, Ltd. v. Friedlen, 2015 WI 45 — Wisconsin Supreme Court
• NBZ, Inc. v. Pilarski, 185 Wis. 2d 827 (Ct. App. 1994) — Justia
• Lakeside Oil Co. v. Slutsky, 8 Wis. 2d 157 (1959) — Justia
• Holsen v. Marshall & Ilsley Bank, 52 Wis. 2d 281 (1971)
• Wisconsin Uniform Trade Secrets Act, Wis. Stat. § 134.90 — Wisconsin Legislature
• Marquette Law Faculty Blog, "The Blue Pencil Comes to Wisconsin" — marquette.edu
• Stafford Rosenbaum, "Under Unique Wisconsin Statute, Court Refuses to Enforce Covenant Against Poaching Employees" — staffordlaw.com
• Ryan LLC v. FTC, No. 3:24-cv-00986 (N.D. Tex. Aug. 20, 2024) — FTC press release

This template is provided for informational purposes only and does not constitute legal advice. Wisconsin's Wis. Stat. § 103.465 is among the strictest non-compete statutes in the United States — any unreasonable restraint voids the entire covenant, and Wisconsin courts have NO authority to reform. Customize and review with a Wisconsin-licensed attorney before use.

Prepared for use on ezel.ai — a legal template platform for solo and small-firm practitioners.