Ruling makes it easier to enforce non-competes

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Posted by Acquila on September 19, 2009 at 13:59:29:

Not directly related to radio, but definitely reaches media industry people in its effect.

From The Capital Times-
Ruling makes it easier to enforce non-compete agreements

Non-compete agreements in Wisconsin have a history of not being viewed favorably by the courts in Wisconsin. Enforceable agreements are difficult to draft, leaving litigants to search agreements with a fine-toothed comb to find any hint of over-breadth on the part of the employer, then arguing that the unreasonableness of one restriction renders all restrictions unenforceable.

This "void one, void them all" approach was fostered by a 2001 decision in which the court of appeals held that provisions in non-compete agreements are "intertwined and indivisible" if they govern similar activity which almost all restrictive covenants do.

However, the Wisconsin Supreme Court has now overruled that decision, explaining that separate restrictions in the same agreement are "intertwined and indivisible" only if one provision cannot be read or interpreted without reference to the other. (See Star Direct Inc. v. Dal Pra, 2009 WI 76.) If an otherwise enforceable requirement in a non-compete agreement can stand on its own, it can be enforced even if another requirement in the same agreement is unenforceable.

The Star Direct decision opens the courthouse door to employers looking to enforce their non-compete agreements. An employer who might have been hesitant to seek enforcement of a valid non-solicitation provision can now do so even if the non-solicitation requirement is in the same agreement as an unreasonably overbroad non-disclosure or non-competition requirement - as long as the non-solicitation provision can stand alone, without reference to the other, unenforceable provisions.

The court's decision in Star Direct also made it easier to enforce non-compete agreements by holding that:

1. Although courts must interpret covenants not to compete in favor of the employee, that does not mean they should make an effort to find the covenant unenforceable. Instead, covenants must be read as a whole and interpreted to avoid absurd results, to give the words plain meaning, and to give meaning to every provision.

2. If an employer consistently requires new sales employees to sign non-compete agreements, the fact that a few pre-existing employees have not signed an agreement will not defeat the enforceability of the agreement against the more recent employees.

3. Employers have a legitimate interest in prohibiting solicitation of former customers who were customers within the recent past, even though the employer does not have a current relationship with the customer.

4. Employers may prohibit solicitation of customers with whom the employee did not have recent personal contact, so long as the employee had access to information about the customer's specific needs and wants or the employer's business that would give the employee a competitive advantage over ordinary competitors.

Each of these holdings will help Wisconsin employers enforce non-compete agreements, so that an employee cannot "usurp for his own benefit the customers, relationships, and opportunities that [the employer] paid for and invested in."

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