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Thursday, 03 September 2009 00:00

New Standard for Non-Compete Clauses

The Wisconsin Supreme Court adopted new standards that tend to save contracts designed to prevent ex-employees from competing with their former employers. In Star Direct v. Dal Pra, the Court determined that portions of a restrictive covenant may be enforced even after another section is deemed unenforceable, so long as the surviving provisions remain understandable and capable of independent enforcement. Although restrictive covenants are generally disfavored, non-compete agreements are lawful if the restriction is “reasonably necessary for the protection of the employer.” The employer must show a legitimate protectable interest.

Dal Pra, the employer had restrictions covering ex-employees competing with its business (“business clause”), contacting its customers (“customer clause”), and protecting proprietary information (“confidentiality clause”). The Court found that Star Direct had a protectable interest in the special knowledge of its business practices and customers accessed by its salespeople. Although two clauses were held to be overbroad because they prevented an ex-employee from competing in a business “substantially similar to” Star Direct, the confidentiality clause was held to be reasonable.

The question for the Court, based on precedent, was whether all three clauses should fail because at least one clause had failed. The answer was a new standard: “Whether, if the unreasonable portion is stricken, the other provision or provisions may be understood and independently enforced.” The answer in

What does this mean for employers? The Supreme Court has now given employers in Wisconsin an even better chance of successfully enforcing a non-compete clause with a former employee.

Our experienced lawyers can assist you with planning, drafting and implementing non-compete provisions if you believe that they are necessary to protect your business.

For more details, or if you have any questions, please feel free to contact any of our lawyers to see if you can gain through our experience.

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