The Wisconsin Court of Appeals has asked the Wisconsin Supreme Court for “guidance” as to whether additional consideration is required to support a covenant not to compete entered into during an at-will employment relationship. The case, Runzheimer International, LTD v. Friedlen, involves an action by Runzheimer International, Ltd to enforce a non-compete agreement signed by David Friedlen in 2009, after Friedlen had been working at Runzheimer as an at-will employee for nearly 20 years. Signing the agreement was made a condition of Friedlen’s continued employment and his participation in the company’s yearly incentive plan. The agreement did not increase Friedlen’s salary, nor did it make him eligible for incentives that he had not been eligible for prior to signing the agreement. The trial court found that the non-compete was invalid because it lacked sufficient consideration. Runzheimer appealed, arguing that there should be no difference in how courts treat restrictive covenants entered into at the start of employment and those entered into after years of employment, because “every day is a new day both for employer and employee in an at-will relationship.”
Runzheimer, in its briefing, suggested that Wisconsin courts ought to be allowed to evaluate the circumstances occurring after the restrictive covenant was signed to determine whether the agreement was reasonable, pointing to neighboring Illinois as an example of a state which has arguably followed this practice. Other states have shunned this case by case inquiry due to the traditional rule that “the law does not inquire as to the adequacy of consideration to support a promise, only its existence.”
The court of appeals for the First District of Wisconsin concluded that existing Wisconsin Supreme Court precedent was unclear and, to some extent, contradictory in a way that would require the Court of Appeals to contradict the higher court either way it ruled. It therefore certified the question to the state’s highest court for resolution.
Wisconsin has a statute governing non-competes, Wis. Stat. Section 103.465, but the law is silent on the issue of consideration. It is expected that the Wisconsin Supreme Court will rule on this question and provide clear guidance for employers in the Badger State.