Is Continued Employment Sufficient Consideration For a Noncompete Agreement in Wisconsin?

Yes, the Wisconsin Supreme Court recently held that continued at-will employment is sufficient consideration for a noncompete agreement.

In Runzheimer International, Ltd., v. David Friedlen and Corporate Reimbursement Services, Inc., the Wisconsin Supreme Court resolved an issue that was previously unclear under Wisconsin law.  2015 WI 45 (Wis. Apr. 30, 2015).  The key holding of the case is that:

[A]n employer’s forbearance in exercising its right to terminate an at-will employee constitutes lawful consideration for signing a restrictive covenant.

The court based this holding on the doctrine of at-will employment, reasoning that the employer was giving up its right to terminate the employee immediately in exchange for the noncompete.  The court noted that, theoretically, an employer could terminate the employee moments after the employee signs the noncompete.  However, the court explained that the employee would be protected in that circumstance by other legal doctrines, including fraudulent inducement or good faith and fair dealing, which could be used to invalidate the noncompete.

The Runzheimer decision presents a contrast with Minnesota law.  In Minnesota, a noncompete must be signed at the inception of the employment relationship.  If the employment has already started, independent consideration, such as a bonus or a promotion, is required.  See Sanborn Manufacturing Co. v. Currie, 500 N.W.2d 161 (Minn. Ct. App. 1993).

Takeaway:  Continued at-will employment is sufficient consideration to support a noncompete agreement for an existing employee in Wisconsin.

About Michael Miller

Michael is a Chambers-rated attorney in Briggs and Morgan's Employment, Benefits, and Labor group and is head of the firm’s Employment Law Counseling and Compliance practice group. He has 25 years experience counseling employers to prevent unwanted litigation and advises companies of ongoing changes in federal, state and local employment law. Michael advises employers in all areas of employment law including discipline and discharge, leaves of absence, wage and hour compliance, non-compete and confidentiality agreements, affirmative action plans, background checking, and drug/alcohol testing. For Michael's full bio, click here.

Posted on May 14, 2015, in Non-Competition and Confidentiality and tagged . Bookmark the permalink. Comments Off on Is Continued Employment Sufficient Consideration For a Noncompete Agreement in Wisconsin?.

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