A non-compete clause or agreement is a written contract between an employee and their employer that restricts the employee from interacting with others in a way that would compete or interfere with their current employer. This type of contract serves an essential function in commercial life, lowering the risks of exposing a company’s professional secrets, client information, and other strategic tactics and business moves. Although a company cannot force an employee to sign a non-compete clause, an employer may dismiss or choose not to hire a person who declines to sign. When disputes over non-compete agreements arise, commercial litigation may be necessary.
Non-Compete Clause Requirements and Limitations
Typically, non-compete clauses must state the reason for the agreement, be effective on a certain date and for a limited period of time, list a specific geographic area where they will apply, include a non-solicitation clause that restricts an employee from soliciting other employees of the company, and impose penalties if the non-compete clause is broken. Additionally, if the employee chooses not to sign, some sort of compensation must be granted. If this is not included in the non-compete clause, it must be stated within the employee’s employment contract. Non-compete clauses cannot impose restrictions that would affect a person’s ability to earn a living, and they cannot disallow an individual from gaining employment. The terms of these contracts must be fair, just, and reasonable.
Commercial Litigation and Non-Compete Clauses
According to Wis. Stat. § 103.465, which addresses restrictive covenants in employment contracts, a non-compete clause will be enforceable if:
- It is reasonably necessary to protect the employer; and
- It is reasonable in geographic scope and in time limitation.
Any clause forcing an unreasonable restraint is illegal, invalid, and unenforceable.
If your business or future employment is in danger because of a non-compete clause, contact a legal professional to verify the legality of the clause. If further action must occur regarding the non-compete clause, a courtroom judge will have the final say in the legitimacy of the contract.
Penalties for Breaking a Non-Compete Clause
If the court ruled that a non-compete clause is legitimate and has been broken by the employee or the employer, the aggrieved individual may sue the other party for damages. If this occurs, it can be costly for both parties involved.
If the employer sues the employee and wins, the employee may have to pay for lost revenue or sales. If the employee sues the employer and wins, the employer may have to pay the employee for employment limitations or lost income.
Contact a Milwaukee Commercial Litigation Lawyer Today
Are you and/or your business facing legal issues regarding a non-compete clause? Contact a Milwaukee, WI business contracts attorney at Gimbel, Reilly, Guerin & Brown, LLP. We will counsel you on issues related to non-compete agreements, and we will fight to protect your rights and your financial interests. Call our office at 414-271-1440.