103.457 HistoryHistory: 1993 a. 492. 103.46103.46 Contracts; promises to withdraw from or not to join labor, employers’ or cooperative organizations are void. Every undertaking or promise, whether written or oral, express or implied, constituting or contained in any of the following is declared to be contrary to public policy and wholly void and shall not afford any basis for the granting of any legal or equitable relief by any court: 103.46(1)(1) A contract or agreement of hiring or employment between any employer and any employee or prospective employee, in which either party to the contract or agreement undertakes or promises not to join, become or remain a member of any labor organization or of any organization of employers, or in which either party to the contract or agreement undertakes or promises to withdraw from the employment relation if the party joins, becomes or remains a member of any labor organization or of any organization of employers. 103.46(2)(2) A contract or agreement for the sale of agricultural, horticultural or dairy products between a producer of those products and a distributor or purchaser of those products, in which either party to the contract or agreement undertakes or promises not to join, become or remain a member of any cooperative association organized under ch. 185 or 193 or of any trade association of the producers, distributors or purchasers of those products. 103.465103.465 Restrictive covenants in employment contracts. A covenant by an assistant, servant or agent not to compete with his or her employer or principal during the term of the employment or agency, or after the termination of that employment or agency, within a specified territory and during a specified time is lawful and enforceable only if the restrictions imposed are reasonably necessary for the protection of the employer or principal. Any covenant, described in this section, imposing an unreasonable restraint is illegal, void and unenforceable even as to any part of the covenant or performance that would be a reasonable restraint. 103.465 AnnotationA provision in an employer’s profit-sharing and retirement plan that calls for the forfeiture of benefits by employees who engage in competitive enterprises is valid and enforceable only if it meets the requirements of this section. Holsen v. Marshall & Ilsley Bank, 52 Wis. 2d 281, 190 N.W.2d 189 (1971). 103.465 AnnotationA provision of a pension plan denying benefits if the retired employee accepted any employment in the same industry without limit as to time or area was void. Estate of Schroeder v. Gateway Transportation Co., 53 Wis. 2d 59, 191 N.W.2d 860 (1971). 103.465 AnnotationThis section, limiting the enforceability of covenants not to compete to those containing restrictions reasonably necessary for the protection of the employer or principal, incorporates pre-existing common law principals that contracts in restraint of trade are viewed with disfavor. Behnke v. Hertz Corp., 70 Wis. 2d 818, 235 N.W.2d 690 (1975). 103.465 AnnotationA profit-sharing plan that provided for forfeiture in the event that a covered employee worked for a “competitive business” was construed to apply only to businesses that seek out and appeal to the same customers and offer substantially identical services. Zimmerman v. Brennan, 78 Wis. 2d 510, 254 N.W.2d 719 (1977). 103.465 AnnotationThe basic requirements for an enforceable restrictive covenant are that the agreement must: 1) be necessary for the protection of the employer; 2) provide a reasonable time period; 3) cover a reasonable territory; 4) not be unreasonable to the employee; and 5) not be unreasonable to the general public. Chuck Wagon Catering, Inc. v. Raduege, 88 Wis. 2d 740, 277 N.W.2d 787 (1979). 103.465 AnnotationA covenant prohibiting an executive employee from contacting company clients with whom the employee had had no previous contact was not unreasonable per se. Hunter of Wisconsin, Inc. v. Hamilton, 101 Wis. 2d 460, 304 N.W.2d 752 (1981). 103.465 AnnotationA covenant not to compete is not automatically voided by the presence of an unreasonable provision for liquidated damages. Whether specific restraints as to area and time are necessary to protect the employer is a question of law to be resolved on the basis of the facts. Fields Foundation, Ltd. v. Christensen, 103 Wis. 2d 465, 309 N.W.2d 125 (Ct. App. 1981). 103.465 AnnotationAn agreement requiring agents of an insurance company to forfeit their extended earnings if after termination they engaged in certain competitive practices was unenforceable. Streiff v. American Family Mutual Insurance Co., 118 Wis. 2d 602, 348 N.W.2d 505 (1984). 103.465 AnnotationTerritorial limits in a restrictive covenant need not be expressed in geographical terms. General Medical Corp. v. Kobs, 179 Wis. 2d 422, 507 N.W.2d 381 (Ct. App. 1993). 103.465 AnnotationAn employer is not entitled to protection against ordinary competition of the type a stranger would give. There must be special facts that render the covenant necessary for the protection of the employer’s business. Wausau Medical Center, S.C. v. Asplund, 182 Wis. 2d 274, 514 N.W.2d 34 (Ct. App. 1994). 103.465 AnnotationA valid covenant not to compete requires consideration. Continued employment, absent a requirement that the employment requires executing the agreement, is not consideration. NBZ, Inc. v. Pilarski, 185 Wis. 2d 827, 520 N.W.2d 93 (Ct. App. 1994). 103.465 AnnotationThis section sets out its own remedy. A violation does not grant an automatic right to pursue a wrongful discharge claim, but voids the covenant. Tatge v. Chambers & Owen, Inc., 210 Wis. 2d 51, 565 N.W.2d 150 (Ct. App. 1997), 95-2928. 103.465 AnnotationIt would be an exercise in semantics to overlook this section merely because a contract provision is labeled a non-disclosure provision rather than a covenant not to compete. This section does not create an exception to the at-will employment doctrine that would allow an employee to refuse to sign a non-disclosure or non-compete clause that the employee considers to be unreasonable. Tatge v. Chambers & Owen, Inc., 219 Wis. 2d 99, 579 N.W.2d 217 (1998), 95-2928. 103.465 AnnotationAny part of an indivisible covenant, even if reasonable on its own, will not be given effect if any other part is unreasonable. A provision that an insurance agent was to have no contact with company clients without geographic restriction was overbroad, as was a provision that the agent not work for a named competitor in any capacity. Mutual Service Casualty Insurance Co. v. Brass, 2001 WI App 92, 242 Wis. 2d 733, 625 N.W.2d 648, 00-2681. 103.465 Annotation“Specified territory” in this section encompasses customer lists as well as geographic locations. A covenant not to compete based on a customer list limitation is not invalid per se. Farm Credit Services of North Central Wisconsin v. Wysocki, 2001 WI 51, 243 Wis. 2d 305, 627 N.W.2d 444, 99-1013. 103.465 AnnotationA covenant not to compete cannot escape the requirement of territorial reasonableness by not including any geographical parameters. A covenant without any specified territory is void. Equity Enterprises, Inc. v. Milosch, 2001 WI App 186, 247 Wis. 2d 172, 633 N.W.2d 662, 00-2827. 103.465 AnnotationA penalty provision in a contract that is invoked if there is a violation of an unreasonable covenant not to compete must be read with, and is intertwined with, the covenant. As such, it is an unreasonable covenant itself. Equity Enterprises, Inc. v. Milosch, 2001 WI App 186, 247 Wis. 2d 172, 633 N.W.2d 662, 00-2827. 103.465 AnnotationAn employer is not allowed to circumvent the protections under this section by restricting the employment opportunities of its employees through contracts with other employers without employee knowledge and consent. An employer cannot indirectly restrict employees in a way that it cannot do directly under this section. Heyde Cos. v. Dove Healthcare, LLC, 2002 WI 131, 258 Wis. 2d 28, 654 N.W.2d 830, 01-0863. 103.465 AnnotationA provision extending the time period in a noncompete clause “by any period(s) of violations” was unreasonable and rendered the clause entirely void under this section. The effect of the extension provision made the duration of the restraint not a fixed and definite time period but a time period contingent upon outcomes the employee could not predict. H&R Block Eastern Enterprises, Inc. v. Swenson, 2008 WI App 3, 307 Wis. 2d 390, 745 N.W.2d 421, 06-1210. 103.465 AnnotationA clause that prohibited a former employee from contacting “past customers,” defined as those who purchased from the former employer within one year prior to the employee’s termination, was reasonable and enforceable. Star Direct, Inc. v. Dal Pra, 2009 WI 76, 319 Wis. 2d 274, 767 N.W.2d 898, 07-0617. 103.465 AnnotationA clause that prohibited a former employee from engaging “in any business which is substantially similar to or in competition with” the former employer was unreasonable and unenforceable. As the disjunctive “or” plainly separates a substantially similar business from one “in competition with” the employer, the only reasonable reading, giving meaning to every phrase, is that it attempts to bar the former employee not only from competitive enterprises, but also from engaging in a business that is not competitive. Star Direct, Inc. v. Dal Pra, 2009 WI 76, 319 Wis. 2d 274, 767 N.W.2d 898, 07-0617. 103.465 AnnotationThe legislative history and text of this section do not eliminate or modify the common law rules on divisibility. In the context of multiple non-compete provisions in a contract, indivisibility will usually be seen by an intertwining, or inextricable link, between the various provisions via a textual reference such that one provision cannot be read or interpreted without reference to the other. Restrictive covenants are divisible when the contract contains different covenants supporting different interests that can be independently read and enforced. Overlap, even substantial overlap, between clauses is not necessarily determinative. Star Direct, Inc. v. Dal Pra, 2009 WI 76, 319 Wis. 2d 274, 767 N.W.2d 898, 07-0617. 103.465 AnnotationThe common law’s rule of reason, not this section, governed the validity of the covenant not to compete contained in the stock option agreement in this case. This section has been applied in circumstances where the restrictive covenant is contained in a document other than the employment agreement, but the employer nonetheless enjoys a bargaining advantage over employees. Here the employer had no bargaining advantage, there were no consequences attached to a refusal to accept the agreement, and the employee received the benefit of his bargain. Selmer Co. v. Rinn, 2010 WI App 106, 328 Wis. 2d 263, 789 N.W.2d 621, 09-1353. 103.465 AnnotationAn employer’s forbearance in exercising its right to terminate an at-will employee constitutes lawful consideration for a restrictive covenant. Although, theoretically, an employer could terminate an employee’s employment shortly after having the employee sign a restrictive covenant, the employee would then be protected by other contract formation principles such as fraudulent inducement or good faith and fair dealing, so that the restrictive covenant could not be enforced. Runzheimer International, Ltd. v. Friedlen, 2015 WI 45, 362 Wis. 2d 100, 862 N.W.2d 879, 13-1392. 103.465 AnnotationThis section, which explicitly refers to a “covenant not to compete,” applied to a non-solicitation of employees provision that prohibited the defendant, a former employee of the plaintiff, from soliciting, inducing, or encouraging any employee of the plaintiff to terminate his or her employment with the plaintiff or to accept employment with a competitor, supplier, or customer of the plaintiff. Manitowoc Co. v. Lanning, 2018 WI 6, 379 Wis. 2d 189, 906 N.W.2d 130, 15-1530. 103.465 AnnotationThe following two-step test applies to motions to dismiss: 1) the court should first interpret the covenant as a contract; and 2) then, the court should determine whether there is a provable set of facts in which all of its restraints are reasonable and should consider the allegations in the pleadings, to the extent that they might be relevant to the analysis. In the posture of a motion to dismiss, the issue presented is whether there is at least one evident or hypothetical application of the covenant’s plain text that is unreasonable because no facts could be proven that would render the protection created by the restraint reasonably necessary to the former employer. Diamond Assets LLC v. Godina, 2022 WI App 47, 404 Wis. 2d 404, 979 N.W.2d 586, 21-1079. 103.465 AnnotationA restrictive covenant was not overbroad. Brunswick Corp. v. Jones, 784 F.2d 271 (1986). 103.465 AnnotationAn agreement to accept an education loan funded by certain employers on the condition that the recipient repay it in kind by working for a contributor or repaying it in cash if the recipient accepts employment with a non-contributor was not a covenant subject to this section. Milwaukee Area Joint Apprenticeship Training Committee v. Howell, 67 F.3d 1333 (1995). 103.465 AnnotationAn obligation to repay an employer’s costs for training an employee if the employee did not remain employed for a specified time was not a covenant not to compete under this section. This section applies only to the extent a consequence is linked to working for the employer’s competition. Heder v. City of Two Rivers, 295 F.3d 777 (2002). 103.465 AnnotationThis section does not apply to franchisees under franchise agreements. H&R Block Eastern Tax Services, Inc. v. Vorpahl, 255 F. Supp. 2d 930 (2003). 103.465 AnnotationThe public policy underlying this section is that Wisconsin law favors the mobility of workers. Compliance with a contractual obligation to return property already belonging to an employer does not violate public policy concerning employee mobility. Genzyme Corp. v. Bishop, 463 F. Supp. 2d 939 (2006). 103.465 AnnotationNondisclosure agreements at issue in this case were not covered by this section. Even if a nondisclosure provision restricts disclosure of trade secret information, if it also restricts disclosure of information that is not a trade secret, this section requires a time limitation on the provision. Friemuth v. Fiskars Brands, Inc., 681 F. Supp. 2d 985 (2010). 103.465 AnnotationIn this case, a high-ranking employee received additional compensation for agreeing to a non-compete clause. The clause was neither unreasonable nor unduly harsh to the employee. Faced with the choice, many key employees would rationally take the extra money in exchange for a reasonable restraint on their post-employment activities. A reasonably drafted non-compete that holds up in court is not just a one-sided victory for employers; it is a means of preserving and enhancing the ability of employees to obtain additional compensation for being key employees in the first place. Schetter v. Newcomer Funeral Service Group, Inc., 191 F. Supp. 3d 959 (2016). 103.465 AnnotationTrade secrets under s. 134.90 are an exception to the rule that non-disclosure agreements require geographical and temporal limits. Charles Schwab & Co. v. Lagrant, 483 F. Supp. 3d 625 (2020). 103.465 AnnotationDrafting and Enforcing Restrictive Covenants Not to Compete. Richards. 55 MLR 241 (1972).
103.465 AnnotationTurning Wisconn Valley into the Next Silicon Valley: Reforming Wisconsin Non-Compete Law to Attract High-Tech Employers. Krause. 103 MLR 237 (2019).
103.465 AnnotationOffers You Can’t Refuse: Post-Hire Noncompete Agreement Insertions and Procedural Unconscionability Doctrine. Enger. 2020 WLR 769.
103.465 AnnotationDrafting enforceable covenants not to compete. Nettesheim. WBB Oct. 1986.
103.465 AnnotationViewpoint: Can Employers Force Employees to Sign Noncompete Agreements as a Condition of Their Employment? Cohen & Stuart. Wis. Law. May 1999.
103.465 AnnotationProtecting Business Interests With Covenants Not to Compete. McNeilly & Krzoska. Wis. Law. May 2006.
103.465 AnnotationStar Direct Takes Restrictive Covenant Law in a New Direction. Backer. Wis. Law. Nov. 2009.
103.465 AnnotationReining It In: Limits to Employee Nonsolicit Covenants. Kreiter, Cook, & Lopez. Wis. Law. Apr. 2018.
103.503103.503 Substance abuse prevention on public works and public utility projects. 103.503(1)(a)(a) “Accident” means an incident caused, contributed to, or otherwise involving an employee that resulted or could have resulted in death, personal injury, or property damage and that occurred while the employee was performing the work described in s. 66.0903 (4), 2013 stats., or s. 16.856 (2m), 2015 stats., on a project of public works or while the employee was performing work on a public utility project. 103.503(1)(c)(c) “Contracting agency” means a local governmental unit or a state agency that has contracted for the performance of work on a project of public works or a public utility that has contracted for the performance of work on a public utility project. 103.503(1)(d)(d) “Drug” means any controlled substance, as defined in s. 961.01 (4), or controlled substance analog, as defined in s. 961.01 (4m), for which testing is required by an employer under its substance abuse prevention program under this section. 103.503(1)(e)(e) “Employee” means a laborer, worker, mechanic, or truck driver who performs the work described in s. 66.0903 (4), 2013 stats., or s. 16.856 (2m), 2015 stats., on a project of public works or on a public utility project. 103.503(1)(f)(f) “Employer” means a contractor, subcontractor, or agent of a contractor or subcontractor that performs work on a project of public works or on a public utility project. 103.503(1)(fm)(fm) “Local governmental unit” means a political subdivision of this state, a special purpose district in this state, an instrumentality or corporation of such a political subdivision or special purpose district, a combination or subunit of any of the foregoing, or an instrumentality of the state and any of the foregoing. 103.503(1)(g)(g) “Project of public works” means a project of public works that would be subject to s. 66.0903, 2013 stats., if the project were erected, constructed, repaired, remodeled, or demolished prior to January 1, 2017, or that would be subject to s. 16.856, 2015 stats., if the project were erected, constructed, repaired, remodeled, or demolished prior to September 23, 2017. 103.503(1)(h)(h) “Public utility” has the meaning given in s. 196.01 (5) and includes a telecommunications carrier, as defined in s. 196.01 (8m), an alternative telecommunications utility, as defined in s. 196.01 (1d), or, for purposes of subs. (2) and (4), a cooperative association organized under ch. 185 for the purpose of producing or furnishing heat, light, power, or water to its members only. 103.503(1)(i)(i) “Public utility project” means a project erected, constructed, repaired, remodeled, or demolished for a public utility on a public right-of-way. For purposes of sub. (3), “public utility project” does not include a project erected, constructed, repaired, remodeled, or demolished for a cooperative association organized under ch. 185 for the purpose of producing or furnishing heat, light, power, or water to its members only. 103.503(1)(j)(j) “State agency” means any office, department, independent agency, institution of higher education, association, society, or other body in state government created or authorized to be created by the constitution or any law, including the legislature and the courts. “State agency” also includes the University of Wisconsin Hospitals and Clinics Authority, the Fox River Navigational System Authority, and the Wisconsin Aerospace Authority. 103.503(2)(2) Substance abuse prohibited. No employee may use, possess, attempt to possess, distribute, deliver, or be under the influence of a drug, or use or be under the influence of alcohol, while performing the work described in s. 66.0903 (4), 2013 stats., or s. 16.856 (2m), 2015 stats., on a project of public works or while performing work on a public utility project. An employee is considered to be under the influence of alcohol for purposes of this subsection if he or she has an alcohol concentration that is equal to or greater than the amount specified in s. 885.235 (1g) (d). 103.503(3)(3) Substance abuse prevention programs required. 103.503(3)(a)(a) Before an employer may commence work on a project of public works or a public utility project, the employer shall have in place a written program for the prevention of substance abuse among its employees. At a minimum, the program shall include all of the following: 103.503(3)(a)2.2. A requirement that employees performing the work described in s. 66.0903 (4), 2013 stats., or s. 16.856 (2m), 2015 stats., on a project of public works or performing work on a public utility project submit to random, reasonable suspicion, and post-accident drug and alcohol testing and to drug and alcohol testing before commencing work on the project, except that testing of an employee before commencing work on a project is not required if the employee has been participating in a random testing program during the 90 days preceding the date on which the employee commenced work on the project. 103.503(3)(a)3.3. A procedure for notifying an employee who violates sub. (2), who tests positive for the presence of a drug in his or her system, or who refuses to submit to drug or alcohol testing as required under the program that the employee may not perform work on a project of public works or a public utility project until he or she meets the conditions specified in sub. (4) (b) 1. and 2. 103.503(3)(b)(b) Each employer shall be responsible for the cost of developing, implementing, and enforcing its substance abuse prevention program, including the cost of drug and alcohol testing of its employees under the program. The contracting agency is not responsible for that cost, for the cost of any medical review of a test result, or for any rehabilitation provided to an employee. 103.503(4)(a)(a) No employer may permit an employee who violates sub. (2), who tests positive for the presence of a drug in his or her system, or who refuses to submit to drug or alcohol testing as required under the employer’s substance abuse prevention program under sub. (3) to perform work on a project of public works or a public utility project until he or she meets the conditions specified in par. (b) 1. and 2. An employer shall immediately remove an employee from work on such a project if any of the following occurs: 103.503(4)(a)1.1. The employee violates sub. (2), tests positive for the presence of a drug in his or her system, or refuses to submit to drug or alcohol testing as required under the employer’s substance abuse prevention program. 103.503(4)(a)2.2. An officer or employee of the contracting agency has a reasonable suspicion that the employee is in violation of sub. (2) and requests the employer to immediately remove the employee from work on the project. 103.503(4)(b)(b) An employee who is barred or removed from work on a project under par. (a) may commence or return to work on the project upon his or her employer providing to the contracting agency documentation showing all of the following: 103.503(4)(b)1.1. That the employee has tested negative for the presence of drugs in his or her system and is not under the influence of alcohol as described in sub. (2). 103.503(4)(b)2.2. That the employee has been approved to commence or return to work on the project. If the employer is required to have in place a substance abuse prevention program under sub. (3), that approval shall be granted in accordance with the employer’s substance abuse prevention program under sub. (3). 103.503(4)(c)(c) Testing for the presence of drugs or alcohol in an employee’s system and the handling of test specimens shall be conducted in accordance with guidelines for laboratory testing procedures and chain-of-custody procedures established by the substance abuse and mental health services administration of the federal department of health and human services. 103.503(4m)(4m) Public utility projects; nonapplicability. 103.503(4m)(a)(a) This section does not apply to an employee performing work on a public utility project who is subject to drug or alcohol testing under 49 CFR Parts 40, 199, or 382. 103.503(4m)(b)(b) Subsection (3) does not apply to an employer that performs work on a public utility project for a cooperative association organized under ch. 185 for the purpose of producing or furnishing heat, light, power, or water to its members only. 103.503(5)(5) Local ordinances; strict conformity required. A local governmental unit, as defined in s. 66.0903 (1) (d), may enact an ordinance regulating the conduct regulated under this section only if the ordinance strictly conforms to this section. 103.505103.505 Collective bargaining; definitions. When used in ss. 103.505 to 103.61, and for the purposes of those sections: 103.505(1)(1) A case shall be held to involve or to grow out of a labor dispute when the case involves persons who are engaged in a single industry, trade, craft, or occupation; or who are employees of one employer; or who are members of the same or an affiliated organization of employers or employees; whether such dispute is any of the following: 103.505(1)(a)(a) Between one or more employers or associations of employers and one or more employees or associations of employees. 103.505(1)(b)(b) Between one or more employers or associations of employers and one or more employers or associations of employers. 103.505(1)(c)(c) Between one or more employees or associations of employees and one or more employees or associations of employees. 103.505(1)(d)(d) Between any conflicting or competing interests in a labor dispute of persons participating or interested in the labor dispute. 103.505(2)(2) A person or association shall be held to be a person participating or interested in a labor dispute if relief is sought against the person or association and if the person or association is engaged in the industry, trade, craft, or occupation in which the labor dispute occurs, or is a member, officer, or agent of any association of employers or employees engaged in that industry, trade, craft, or occupation.
