The bill defines "legitimate business interest" to include: 1) a trade secret or
any other business or professional information that is valuable and confidential but
that does not qualify as a trade secret; 2) substantial relationships with specific
existing or prospective customers, patients, or clients; 3) customer, patient, or client
goodwill associated with a specific geographic location, a specific marketing or trade
area, or an ongoing business or professional practice; or 4) unique, extraordinary, or
specialized training provided by a business or professional practice or otherwise
obtained as a result of an employment or agency relationship with a business or
professional practice.
In determining whether a restraint is overbroad, overlong, or otherwise not
reasonably necessary to protect the legitimate business interests justifying the
restrictive covenant and, if so, how to modify the restraint so that the restrictive
covenant provides only such restraint as is reasonably necessary to protect those
interests, the bill requires a court to consider all of the following:
1. The duration, scope, and nature of the relationship between the person
seeking enforcement of the restrictive covenant and the person against whom
enforcement is sought prior to the commencement of the enforcement action.
2. The duration, scope, and nature of the potential harm to those legitimate
business interests that might result from a violation of the restrictive covenant.
3. Any conduct by the person against whom enforcement of the restrictive
covenant is sought, beginning on the date of execution of the restrictive covenant,
that is relevant to a determination of the proper duration, scope, and nature of the
restraint and to enforcement of the restraint.
4. Evidence of common practice with respect to the duration, scope, and nature
of restraints in the specific industry of the person seeking enforcement of the
restrictive covenant.
Rebuttable presumptions. In addition, the bill requires a court, in
determining the reasonableness of a restrictive covenant, to apply the following
rebuttable presumptions:
1. In the case of a restrictive covenant that applies after the termination of an
employment or agency relationship, that a restraint of six months or less is presumed
to be reasonable and a restraint of longer than two years is presumed to be
unreasonable.
2. In the case of a restrictive covenant the consideration for which consists of
a promise of garden leave during the term of the restrictive covenant, that the
restrictive covenant is presumed to be reasonable.
Third-party beneficiaries, assignees, and successors. Under the bill,
subject to certain conditions, a court may not refuse to enforce a restrictive covenant
on the ground that the person seeking enforcement of the restrictive covenant is a

third-party beneficiary of the restrictive covenant or is an assignee of or a successor
to a party to the restrictive covenant.
Enforcement considerations. The bill also requires a court, in determining
the enforceability of a restrictive covenant, to consider the effect of enforcement of
the restrictive covenant on the public health, safety, and welfare and to consider all
pertinent legal and equitable defenses, except that the court may not consider any
individualized economic or other hardship that might be caused to the person against
whom enforcement is sought, unless that person shows that exceptional personal
circumstances exist, and the court may consider as a defense to the enforcement of
the restrictive covenant the fact that the person seeking enforcement is no longer in
business in the area or line of business that is the subject of the action to enforce the
restrictive covenant only if the discontinuance of business is not the result of a
violation of the restrictive covenant.
Construction of restrictive covenants. Moreover, the bill requires a court
to construe a restrictive covenant in favor of providing reasonable protection to all
legitimate business interests established by the person seeking enforcement of the
restrictive covenant and not to employ any rule of contractual interpretation that
requires a restrictive covenant to be construed narrowly, against the restraint, or
against the drafter of the restrictive covenant.
Public policy. Further, the bill prohibits a court from refusing to enforce an
otherwise enforceable restrictive covenant on the ground that the restrictive
covenant violates public policy unless the court specifically articulates the public
policy and finds that the public policy substantially outweighs the policy underlying
the bill and the need to protect the legitimate business interests established by the
person seeking enforcement of the restraint.
Disputes resolved by agreement. Additionally, the bill permits parties that
reach an agreement resolving a pending or threatened action for enforcement of a
restrictive covenant to file that agreement with the court and request the court to
adopt the agreement as the resolution of the parties' dispute. If the court finds that
the agreement is reasonable and consistent with the policy underlying the bill, the
court may incorporate the terms of the agreement into an order resolving the action.
Remedies; costs and attorney fees. Finally, the bill provides: 1) that if a court
determines that a restrictive covenant is enforceable, the court must enforce the
restrictive covenant by any appropriate and effective remedy, including a temporary
or permanent injunction (injunctive relief); 2) that the court may not require a party
seeking enforcement of a restrictive covenant to post a bond as a condition to
obtaining injunctive relief, but may order that party to provide to the party enjoined
security against any damages that he or she may sustain by reason of the injunctive
relief in an amount that is sufficient to protect his or her interests; 3) that if a
restrictive covenant contains a contractual provision authorizing the award of costs
and attorney fees, a court must award costs and attorney fees in accordance with that
contractual provision; and 4) that, in the absence of a contractual provision

authorizing the award of costs and attorney fees, a court may award costs and
attorney fees to the prevailing party.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB91,1 1Section 1. 103.465 of the statutes is repealed and recreated to read:
AB91,5,3 2103.465 Restrictive covenants in employment and agency
3relationships.
(1) Definitions. In this section:
AB91,5,74 (a) "Garden leave" means paid leave granted to an employee from the date on
5which the employer receives notice of resignation of the employee from the
6employment relationship or provides notice to the employee of termination of the
7employment relationship to the date on which the employment relationship ends.
AB91,5,88 (b) "Legitimate business interest" includes all of the following:
AB91,5,119 1. A trade secret, as defined in s. 134.90 (1) (c), or any other business or
10professional information that is valuable and confidential to a business or
11professional practice but that does not qualify as a trade secret.
AB91,5,1312 2. Substantial relationships with specific existing or prospective customers,
13patients, or clients of a business or professional practice.
AB91,5,1714 3. Customer, patient, or client goodwill associated with a specific geographic
15location; a specific marketing or trade area; or an ongoing business or professional
16practice by way of a trade name, trademark, service mark, or trade dress that
17identifies a good or service with the business or professional practice.
AB91,5,2018 4. Unique, extraordinary, or specialized training provided by a business or
19professional practice or obtained as a result of an employment or agency relationship
20with a business or professional practice.
AB91,6,2
1(c) "Posttermination restrictive covenant" means a restrictive covenant that
2applies after termination of an employment or agency relationship.
AB91,6,43 (d) "Restraint" means a restriction on or prohibition against competition
4provided in a restrictive covenant.
AB91,6,105 (e) "Restrictive covenant" means an agreement that restricts or prohibits
6competition by an employee or agent of a business or professional practice during the
7term of the employment or agency relationship or after the termination of that
8relationship. "Restrictive covenant" does not include an agreement that does not
9restrict or prohibit competition by an employee or agent of a business or professional
10practice, including any of the following:
AB91,6,1511 1. An agreement restricting or prohibiting an employee or agent from
12disclosing business or professional information that is valuable and confidential to
13the employer or principal, but that is not valuable and confidential to a competitor
14of the employer or principal or useful to the employee, the agent, or a competitor in
15obtaining a competitive advantage over the employer or principal.
AB91,6,2216 2. An agreement restricting or prohibiting the solicitation or hiring of an
17employee or agent who is not privy to valuable and confidential business or
18professional information of the business or professional practice, who does not have
19substantial relationships with existing or prospective customers, patients, or clients,
20and who has not received unique, extraordinary, or specialized training provided by
21the business or professional practice or otherwise obtained as a result of the
22employment or agency relationship with the business or professional practice.
AB91,7,2 23(2) Enforcement of restrictive covenants. (a) Reasonableness and valid
24consideration.
Subject to sub. (3), a restrictive covenant is enforceable if the

1restrictive covenant is reasonable as to time, area, and line of business and is
2supported by valid consideration, as determined under par. (b).
AB91,7,63 (b) Determination of valid consideration. In any action for the enforcement of
4a restrictive covenant, a court shall determine that the restrictive covenant is
5supported by valid consideration if the court finds that any of the following situations
6exists:
AB91,7,107 1. That the restrictive covenant was executed at, or within a reasonable time
8after, the commencement of the employment or agency relationship and that the offer
9of employment or agency, or of continuation of the employment or agency
10relationship, was contingent on the execution of the restrictive covenant.
AB91,7,1511 2. That the restrictive covenant was executed after the time frame specified in
12subd. 1., but before the time frame specified in subd. 3., and that at or about the time
13of execution of the restrictive covenant the employee or agent received in connection
14with the execution of the restrictive covenant any payment or other thing of value,
15including any of the following:
AB91,7,1616 a. Monetary consideration.
AB91,7,1717 b. A bonus or incentive payment.
AB91,7,2118 c. In the case of an employee, additional paid time off, if the employee
19acknowledged at the time of execution of the restrictive covenant that the amount
20of additional paid time off is adequate consideration to support the restrictive
21covenant.
AB91,7,2522 d. Access to a bonus or other incentive program or pool through which the
23employee or agent receives additional compensation, if the employee or agent would
24not have had access to the program had he or she not executed the restrictive
25covenant.
AB91,8,4
1e. Continuation of the employment or agency relationship at a rate of pay and
2benefits that is equal to or greater than the pay and benefits received before the
3execution of the restrictive covenant, if continuation of the employment or agency
4relationship is contingent on execution of the restrictive covenant.
AB91,8,105 f. A promise made at the time of execution of the restrictive covenant to provide
6any payment or other thing of value during the term of the restrictive covenant as
7specified in a written agreement setting forth the circumstances under which that
8payment or other thing of value will be provided, if the employer or principal fulfills
9that promise when those circumstances occur. This subd. 2. f. includes a promise to
10provide garden leave during the term of the restrictive covenant.
AB91,8,1611 3. That the restrictive covenant was executed at or about the time of
12termination of the employment or agency relationship and that the restrictive
13covenant was supported by valid consideration acceptable to the employee or agent
14above and beyond any compensation due the employee or agent and any
15consideration provided for any other covenants, releases, or promises made by the
16employee or agent.
AB91,8,2017 (c) Legitimate business interest. In any action for the enforcement of a
18restrictive covenant, a court may enforce the restrictive covenant if the restrictive
19covenant is in writing and signed by the person against whom enforcement is sought
20and the person seeking enforcement proves all of the following:
AB91,8,2321 1. The existence of one or more legitimate business interests justifying the
22restrictive covenant. Any restrictive covenant not supported by a legitimate
23business interest is illegal, void, and unenforceable.
AB91,9,824 2. That the restraint specified in the restrictive covenant is reasonably
25necessary to protect the legitimate business interest justifying the restrictive

1covenant. If the person seeking enforcement of the restrictive covenant establishes
2a prima facie case that the restraint is reasonably necessary, the person against
3whom enforcement is sought has the burden of establishing that the restraint is
4overbroad, overlong, or otherwise not reasonably necessary to protect the legitimate
5business interest established by the person seeking enforcement. If the restraint is
6overbroad, overlong, or otherwise not reasonably necessary to protect the legitimate
7business interest, the court shall modify the restraint and grant only such relief as
8is reasonably necessary to protect that legitimate business interest.
AB91,9,149 (d) Determination of reasonable necessity of restraint. In determining whether
10a restraint specified in a restrictive covenant is overbroad, overlong, or otherwise not
11reasonably necessary to protect the legitimate business interests justifying the
12restrictive covenant and, if so, how to modify the restraint so that the restrictive
13covenant provides only such restraint as is reasonably necessary to protect those
14interests, a court shall consider all of the following:
AB91,9,1715 1. The duration, scope, and nature of the relationship between the person
16seeking enforcement of the restrictive covenant and the person against whom
17enforcement is sought prior to the commencement of the enforcement action.
AB91,9,1918 2. The duration, scope, and nature of the potential harm to those legitimate
19business interests that might result from a violation of the restrictive covenant.
AB91,9,2320 3. Any conduct by the person against whom enforcement of the restrictive
21covenant is sought, beginning on the date of execution of the restrictive covenant,
22that is relevant to a determination of the proper duration, scope, and nature of the
23restraint and to enforcement of the restraint.
AB91,10,3
14. Evidence of common practice with respect to the duration, scope, and nature
2of restraints in the specific industry of the person seeking enforcement of the
3restrictive covenant.
AB91,10,54 (e) Rebuttable presumptions. In determining the reasonableness of a
5restrictive covenant, a court shall apply the following rebuttable presumptions:
AB91,10,136 1. In the case of a posttermination restrictive covenant, the court shall presume
7a restraint of 6 months or less from the termination of the employment or agency
8relationship to be reasonable and a restraint of longer than 2 years from the
9termination of the employment or agency relationship to be unreasonable. This
10subdivision does not preclude a court from finding that a restraint of longer than 2
11years from the termination of the employment or agency relationship is reasonable
12if the court determines that clear and convincing evidence exists to support that
13finding.
AB91,10,1914 2. In the case of a restrictive covenant the consideration for which consists of
15a promise described in par. (b) 2. f., the court shall presume that restrictive covenant
16to be reasonable. This subdivision does not preclude a court from finding that a
17restrictive covenant the consideration for which consists of a promise described in
18par. (b) 2. f. is unreasonable if the court determines that clear and convincing
19evidence exists to support that finding.
AB91,10,2420 (f) Third-party beneficiaries, assignees, and successors. A court may not refuse
21to enforce a restrictive covenant on the ground that the person seeking enforcement
22of the restrictive covenant is a 3rd-party beneficiary of the restrictive covenant or
23is an assignee of or a successor to a party to the restrictive covenant if any of the
24following apply:
AB91,11,4
11. In the case of a 3rd-party beneficiary of the restrictive covenant, the
2restrictive covenant expressly identifies the person as a 3rd-party beneficiary of the
3restrictive covenant and expressly states that the restrictive covenant is intended for
4the benefit of that person.
AB91,11,75 2. In the case of an assignee of or a successor to a party to the restrictive
6covenant, the restrictive covenant expressly authorizes an assignee of or successor
7to the party to enforce the restrictive covenant.
AB91,11,118 (g) Considerations in enforcing restrictive covenants. In determining the
9enforceability of a restrictive covenant, a court shall consider the effect of
10enforcement of the restrictive covenant on the public health, safety, and welfare and
11shall consider all pertinent legal and equitable defenses, except as follows;
AB91,11,1412 1. The court may not consider any individualized economic or other hardship
13that might be caused to the person against whom enforcement is sought unless that
14person shows that exceptional personal circumstances exist.
AB91,11,1915 2. The court may consider as a defense to the enforcement of the restrictive
16covenant the fact that the person seeking enforcement is no longer in business in the
17area or line of business that is the subject of the action to enforce the restrictive
18covenant only if the discontinuance of business is not the result of a violation of the
19restrictive covenant.
AB91,11,2520 (h) Construction of restrictive covenants. A court shall construe a restrictive
21covenant in favor of providing reasonable protection to all legitimate business
22interests established by the person seeking enforcement of the restrictive covenant.
23A court may not employ any rule of contractual interpretation that requires a
24restrictive covenant to be construed narrowly, against the restraint, or against the
25drafter of the restrictive covenant.
AB91,12,6
1(i) Public policy. No court may refuse to enforce an otherwise enforceable
2restrictive covenant on the ground that the restrictive covenant violates public policy
3unless the court specifically articulates the public policy and finds that the public
4policy substantially outweighs the policy underlying this section and the need to
5protect the legitimate business interests established by the person seeking
6enforcement of the restraint.
AB91,12,147 (j) Dispute resolved by agreement. If the parties to a pending or threatened
8action for enforcement of a restrictive covenant reach an agreement resolving that
9action, the parties may file that agreement with the court and request the court to
10adopt the agreement as the resolution of the parties' dispute. If the court finds that
11the agreement is reasonable and consistent with the policy underlying this section,
12the court may incorporate the terms of the agreement into an order resolving the
13action. If any party is subsequently in violation of the order, any other party may
14commence an action for enforcement of the order.
AB91,12,1915 (k) Remedies. 1. If a court determines that a restrictive covenant is
16enforceable, the court shall enforce the restrictive covenant by any appropriate and
17effective remedy, including a temporary or permanent injunction. Violation of an
18enforceable restrictive covenant creates a presumption of irreparable injury to the
19person seeking enforcement of the restrictive covenant.
AB91,13,220 2. Notwithstanding s. 813.06, the court may not require a party seeking
21enforcement of a restrictive covenant to post a bond as a condition to obtaining the
22injunctive relief specified in subd. 1. The court may, however, as a condition of
23granting such injunctive relief, order the party seeking that relief to provide to the
24party enjoined security against any damages that the party enjoined may sustain by

1reason of the injunctive relief in an amount that is sufficient to protect the interests
2of the party enjoined.
AB91,13,43 3. The rights and remedies provided under this section are in addition to, and
4do not displace, any other rights and remedies that may exist at law or in equity.
AB91,13,125 (L) Costs and attorney fees. If a restrictive covenant contains a contractual
6provision authorizing the award of costs and attorney fees to the prevailing party in
7an action seeking enforcement of, or challenging the enforceability of, a restrictive
8covenant, a court shall award costs and attorney fees in accordance with that
9contractual provision. If a restrictive covenant does not contain such a contractual
10provision, a court may award costs and attorney fees to the prevailing party. A court
11may not enforce any contractual provision limiting the court's authority under this
12paragraph.
AB91,13,15 13(3) Illegal restraints of trade. Nothing is this section shall be construed or
14interpreted to legalize or make enforceable any restraint of trade or commerce that
15is otherwise illegal or unenforceable under s. 133.03 or any similar federal law.
AB91,2 16Section 2. Initial applicability.
AB91,13,2017 (1) Restrictive covenants in employment and agency relationships. This act
18first applies to a restrictive covenant, as defined in section 103.465 (1) (e) of the
19statues, as repealed and recreated by this act, entered into or extended, modified, or
20renewed on the effective date of this subsection.
AB91,13,2121 (End)
Loading...
Loading...