Poorly Drafted Nonsolicitation Agreement Ruled Unenforceable

March 21, 2005

A recent Wisconsin Court of Appeals decision involved the interpretation of a nonsolicitation clause contained in an employment agreement between an employer and four former employees. In The Hayes Benefit Group of Wisconsin, LLC v. Palmer and Cay of Wisconsin, the District Court held that the nonsolicitation language contained in the agreement was overly broad and dismissed the employer’s claims. In analyzing the crucial components of a valid restrictive covenant, the Court of Appeals found that nonsolicitation agreements, like non-compete agreements, must identify a territorial restriction, and reference a particular group of forbidden customers or clients in order to be valid. If a nonsolicitation agreement fails to identify the clients and the geographic area in which the employee may not solicit, a Court will deem the agreement invalid.
If you have questions regarding the above, please contact any of the attorneys in the Employment, Benefits & Labor Relations Practice Group of Ruder Ware.

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