By: Alan E. Seneczko, Esq.

On July 14, 2009, the Wisconsin Supreme Court issued a decision clarifying a number of issues related to non-compete agreements. In Star Direct v. Dal Pra, 2009 WI 76 (2009), the court reviewed three provisions of a non-compete agreement: a "business clause," which prohibited the employee from engaging in a "substantially similar or competitive" business within his assigned territory; a "customer clause," which prohibited him from soliciting current and recent past customers with whom he dealt; and a "confidentiality clause," which prohibited him from using or disclosing marketing techniques, customer lists and trade secrets.

The court found the business clause to be unenforceable, but upheld both the customer and confidentiality clauses. The court determined that the business clause was overbroad because it included "substantially similar" businesses - which may or may not be competitive with the employer's business. On the other hand, it found that the customer clause reasonably included "past customers" (defined as individuals with whom the employee dealt in the previous year), as well as current customers (which included individuals with whom he may not have been in contact for years). Lastly, the court held that the employer had a legitimate interest in protecting the specific, proprietary information outlined in the confidentiality clause. More importantly, the court also found that both the customer and confidentiality clauses could be understood and enforced without consideration of or reliance upon the business clause, and could therefore be severed and enforced on their own.

Although it is always difficult to draft non-compete agreements in a manner that is narrow enough to withstand judicial scrutiny and still have its desired effect, this decision provides valuable additional guidance in doing so.

Questions? Please contact WS Shareholder and Senior Attorney Alan Seneczko in our Oconomowoc office at (262) 560-9696, or alseneczko@wesselssherman.com.