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Do non-compete clauses really have any teeth?

If you are a doctor or nurse in the medical field in Wisconsin, it is possible that you have faced a decision over whether to sign a contract that includes a non-compete agreement. Do you know what it means? Are you of the school of thought that holds that such provisions have no teeth, so signing is no big deal? Let this serve as a word of caution.

Wisconsin law allows restrictive covenants in employment contracts. Therefore, the question worth asking might not be whether such provisions have any teeth, but rather how might any court where a challenge is raised view the matter.

What's reasonable?

The law does make clear that such clauses are enforceable only if the restrictions imposed are "reasonably necessary for the protection of the employer or principal." Obviously, how reasonably necessary is defined depends on the unique circumstances of any given case and the court's interpretation of the facts.

From a legal standpoint, experienced attorneys generally agree that any signatory to a provision that restricts competition inside a certain geographic area for a specific amount of time either during the contract term or upon termination of employment should assume it is enforceable. Clearly, that serves as a strong argument for why you should consult legal counsel before pen touches paper. Renegotiation of covenant terms that are more favorable to you could be only one of the positive results.

If you are in the position of being under a non-compete clause that you feel prevents you from practicing, it may be possible to challenge the terms as being unreasonable. When the courts examine these matters, they are required to assess for five elements:

  1. the agreement necessary for the employer's protection?
  2. Is the designated time-period reasonable?
  3. Are the territorial limits reasonable?
  4. Are any of the restrictions unreasonable to the employee?
  5. Does the agreement violate public policy?

Application of the elements is consistent across Wisconsin courts. However, there has been variation in how they are applied. It's in that light that we offer the suggestion that questions regarding enforceability be addressed to reduce the chance of having to go to court in the first place. 

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