Supreme Court Update: Non-Competes For At-Will Employees
The Wisconsin Supreme Court recently considered the question of what non-compete consideration must be offered by an employer who desires that a current ‘at-will’ employee sign a non-competition restriction.
Introduction To Wisconsin’s Non-Compete Case
Friedlin’s Scenario: Non-Compete Under Scrutiny
When Mr. Friedlin went to work for a competitor, his former employer sued to enforce the non-compete. The employee countered that the document was unenforceable because it was not supported by adequate consideration. The circuit court agreed, ruling that because the employment was ‘at-will’, the employer’s offer not to fire him if he signed the non-compete was illusory since the employer retained the right to fire in any event.
Supreme Court’s Stance On Non-Compete Consideration
On appeal, the supreme court stated that a non-compete signed by an existing at-will employee is not enforceable if the employer fails to do or offer something in exchange. Considering the facts in this case, the court concluded that the promise not to fire the employee in exchange for his acceptance of the non-compete was a ‘real’ exchange of promises, not illusory, and therefore enforceable. The fact that the promise not to fire was for an unspecified period of time “did not matter,” according to the court.
Employer’s Duties: Good Faith And Fraudulent Inducement
Employers should note, however, that legal principles of good faith and fraudulent inducement would prohibit an employer from using this ruling to extract a non-compete from an employee while harboring designs on pushing that employee out soon thereafter. One justice, in a concurring decision, stated that an employer who asks for a non-compete in exchange for continued employment essentially converts the ‘at-will’ employment into an employment contract for a “reasonable period of time” following signing of the non-compete. Apparently, in this case, 29 months was a sufficiently reasonable period of time.
Recommendations For Employers On Non-Competes
Employers wishing to secure non-competition restrictions from current or future employees, or seeking to enforce or interpret existing non-compete agreements, should consult with an experienced Business Attorney. Reach out to a Business Law Attorney at Bosshard Parke to schedule a consultation.
