Wisconsin Supreme Court Rules Continued Employment Is Lawful Consideration To Support A Restrictive Covenant

Wisconsin has firmly joined the majority of jurisdictions in the United States that hold that continued employment constitutes lawful consideration sufficient to enforce a restrictive covenant with a current at-will employee. The Wisconsin Supreme Court's decision in Runzheimer International, Ltd. v. Friedlen and Corporate Reimbursement Services, Inc., 2015 WI 45 (Wis. 2015), is a victory for Wisconsin employers and marks the end of years of debate on this issue.

The Facts and Procedural History

In 2009, Runzheimer International, Ltd. asked all of its employees, including the individual defendant in this case, to sign a restrictive covenant containing non-compete and non-solicitation obligations. The company gave the defendant two weeks to review and sign the covenant, or face termination of his employment. The defendant signed the covenant and worked for the company for 29 more months until his employment was terminated on November 16, 2011.

Following his discharge, the defendant began working for one of Runzheimer's competitors, Corporate Reimbursement Services, Inc. ("CRS"). After learning of the defendant's new position, which Runzheimer believed violated his restrictive covenant, the company sent a letter to him demanding his compliance with the covenant. The defendant ignored the letter because he believed the covenant was unenforceable. Runzheimer sued the defendant and his new employer, alleging the defendant breached the restrictive covenant and CRS tortiously interfered with the covenant. The circuit court granted the defendant's and CRS's motion for summary judgment, finding a promise of continued employment could not constitute consideration for the covenant. Runzheimer appealed, and the court of appeals certified the case to the Wisconsin Supreme Court, asking it to decide whether consideration in addition to continued employment was required to support a restrictive covenant entered into by an existing at-will employee.

The Wisconsin Supreme Court's Analysis and Ruling

The court began its analysis by clarifying the scope of existing case law regarding lawful consideration to support a restrictive covenant with a current at-will employee.

In Star Direct v. Dal Pra, 2009 WI 76 (Wis. 2009), the Wisconsin Supreme Court ruled that employers may not compel their existing employees to sign restrictive covenants without additional consideration. However, the court did not explain what would constitute the requisite additional...