Quirky Question #237, Badger your employees to sign new non-competes?

by Dorsey & Whitney LLP


We are a Wisconsin employer that has recently lost a number of employees to competing companies in our area. We’re worried our competitors are getting an unfair edge in the market, basically using employees we’ve spent time and resources training to compete against us. It doesn’t seem fair. Unfortunately, it didn’t occur to us to have our employees sign non-compete agreements back when we hired them. In light of all this, we wish to have our remaining employees sign non-compete agreements as a condition of their continued employment with us. If an employee refuses to sign, then we plan to terminate him/her. Assuming we craft a reasonable non-compete agreement, is there any problem with this course of action?


Until the Wisconsin Supreme Court provides more guidance on this issue, you may take your proposed course of action, but your safest bet is to provide the employees some additional consideration for signing the agreements, more than just continued employment with your company.

Your question was recently asked in Runzheimer Intl LTD., v. Friedlen, a Wisconsin Court of Appeals decision that has been certified for review by the Wisconsin Supreme Court. In 2009, Runzheimer International required one of its employees, David Friedlen, to sign a non-compete agreement. This, in itself, is not particularly unusual. Employers often require employees to sign non-compete agreements, and, under Wisconsin law, non-compete agreements are valid so long as the restrictions are reasonably necessary for the protection of the employer.

What made this an interesting question under Wisconsin law was the fact that Friedlen had been employed by Runzheimer for nearly 20 years as an at-will employee. Signing the non-compete agreement was required as a condition of his continued employment with Runzheimer and no other consideration or benefit was provided other than the chance to continue working for Runzheimer as an at-will employee. In 2011, about two years after Friedlen had signed the non-compete agreement, Friedlen was terminated and began working for a competitor. Runzheimer then brought suit, seeking to enforce the non-compete agreement.

The trial court held continued at-will employment was illusory and did not constitute sufficient consideration for the agreement. On appeal, the Wisconsin Court of Appeals was asked to address whether continued at-will employment constitutes sufficient consideration to support a non-compete agreement signed after employment has already commenced.

Unfortunately, (and as recognized by the Wisconsin Court of Appeals), case law in Wisconsin is unclear and possibly contradictory. On one hand, one recent Wisconsin Supreme Court case, Star Direct, Inc. v. Del Pra, provides support that a non-compete entered into after employment has commenced requires additional consideration beyond merely continued at-will employment. Indeed, the Star Direct court specifically stated that “employers may not compel their existing employees to sign restrictive covenants without additional consideration.”

At first glance, Star Direct would seem to answer this question. However, for the above proposition, the Star Direct court cited NBZ, Inc. v. Pilarski, a Wisconsin Court of Appeals case which held a non-compete signed after employment commenced was not enforceable because no consideration was provided. But in NBZ, the Wisconsin Court of Appeals held the non-compete was unenforceable, not necessarily because continued at-will employment is insufficient consideration for a non-compete, but because the non-compete was not actually conditioned on continued employment. Indeed, in NBZ, the employer stated it did not know what would have happened to an employee who refused to sign the non-compete agreement. Thus, the NBZ court appeared to imply that a non-compete signed explicitly as a condition of continued at-will employment would be enforceable.

Because of the discrepancy in Wisconsin law, the Court of Appeals in Runzheimer decided not to address the question, instead certifying it to the Wisconsin Supreme Court. Until that Court decides the case, there is no clear rule in Wisconsin about whether continued at-will employment constitutes sufficient consideration for a non-compete agreement entered into after employment has commenced. Some jurisdictions, such as Ohio, have held that continued at-will employment alone is sufficient consideration. Other jurisdictions, such as Minnesota, require additional consideration beyond mere continued at-will employment for a non-compete agreement signed after employment has commenced. Still, other jurisdictions, such as Illinois, permit continued at-will employment to be sufficient consideration so long as the employee remains employed for a “substantial period” after signing the agreement.

In light of this, what can employers in Wisconsin do? Generally, the safest course of action is to either have employees sign a non-compete as a condition of employment before they begin employment, or to provide additional consideration if the non-compete is signed after employment begins. In providing additional consideration, employers should be careful to premise the signing of the non-compete on a benefit that is not generally available and that the employee would not have a right to without signing the non-compete. In short, providing additional consideration – for example, in the form of a bonus the employee would otherwise not be eligible to receive – is likely the safest course of action, at least until the question is definitively answered by the Wisconsin Supreme Court.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dorsey & Whitney LLP | Attorney Advertising

Written by:

Dorsey & Whitney LLP

Dorsey & Whitney LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.