On March 5, 2015, Senate Bill 69 (bill) was introduced by Senator Paul Farrow (R-Pewaukee). If passed by the Wisconsin legislature and signed by the Governor, the bill would eliminate the current version of Wisconsin’s restrictive covenant law, Wis. Stat. § 103.465. The statute applies to agreements with employee such as non-competition, non-solicitation and non-disclosure agreements. In its place, the bill would establish a new pro-enforcement stance toward restrictive covenants. Wisconsin has consistently rated among the weakest restrictive covenant enforcement states for some time; by contrast, Illinois is routinely rated among the top pro-enforcement states. The bill would place Wisconsin among the states with the best enforcement statutes, likely in front of Illinois. Specifically, the bill:

• Clarifies existing Wisconsin law by defining the legitimate business interests that justify a restrictive covenant to include a business’s trade secrets, confidential information, its relationships with existing and prospective customers, its customer, patient, or client goodwill associated with a specific geographic location, and unique, extraordinary, or specialized training provided by business as a result of the employment relationship, among other things.
• Clarifies that “valid consideration” for a restrictive covenant includes the continuation of an employment relationship.
• Provides greater clarity regarding the enforceable duration of a restrictive covenant.
• Authorizes a court to modify an overly broad and otherwise unenforceable restrictive covenant to the extent reasonably necessary to protect an established legitimate business interest. Wisconsin courts do not currently have that right, for the most part, once it finds that a restrictive covenant is overbroad. Under the bill, a court is invited to tailor a reasonable restriction under the facts presented even where the restrictive covenant is overbroad.
• If the bill is passed by the legislature and signed by the Governor, it would first apply to any restrictive covenant that a business enters into, extends, modifies or renews following the effective date. It would not impact existing restrictive covenants. Accordingly, businesses in the process of updating or rolling out new restrictive covenants for their employees may want to reconsider in light of this bill. Restrictive covenants that are signed between now and the effective date of the new law, if passed, will be considered by Wisconsin courts under the existing law which treats such covenants more harshly than the proposed new law.

Watch for future E*Alerts as this important legislation affecting Wisconsin businesses progresses. If you have questions about the restrictive covenant bills, please contact Daniel Finerty at 414-226-4807, or any other Lindner & Marsack attorney at 414-273-3910.