In a fairly significant ruling in state employment law, the Wisconsin Supreme Court expanded the circumstances under which an employee covenant not to compete will be enforced in Wisconsin.
Previously,covenants had to not only be reasonable and necessary to be enforced (under Wis. Stat. § 103.465, non-compete agreements are lawful only if the restriction is “reasonably necessary for the protection of the employer”), but all provisions of the covenant had to meet those requirements. In other words, Wisconsin judges could not “blue pencil” out the offending, unreasonable part of the covenant, and had to hold the entire document unenforceable. Now, after the decision in Star Direct v. Dal Pra, 2009 WI 76 (WI. July 14, 2009), the blue pencil exists for judges to save otherwise unenforceable covenants not to compete.
The Wisconsin Supreme Court adopted on July 14 new standards that tend to save contracts aimed at preventing ex-employees from competing with their former employers.
In Star Direct v. Dal Pra, 2009 WI 76, the court announced that portions of a restrictive covenant may be enforced even after another section is deemed unenforceable, so long as the surviving provisions remain understandable and capable of independent enforcement.
Dissenting justices criticized part of the majority’s analysis for assuming that a court signals approval of issues it could have addressed, but did not. The dissent warned that this new interpretative tool defies precedent and judicial restraint.
So, ladies and gentlemen of the Wisconsin judiciary, blue pencils out!
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