11 Feb

What’s the Deal with Non-Compete Agreements in 2025?

By Erin E. Rome

February 11, 2025

Employers and employees alike have reason to be confused about the state of non-compete agreements in 2025. Have they been banned? Are they still legal? Is there any way I can legally protect my business if one of my employees decides to leave and compete? Our employer clients have contacted us with all of these questions over the last several months. This update will provide guidance on the state of non-compete agreements in Wisconsin as of early 2025, along with tips on what employers can do to protect themselves from potentially harmful competition.

What happened to the non-compete ban?

In April 2024, the Federal Trade Commission (“FTC”) issued a rule (the “Non-Compete Rule”) stating that non-compete agreements constitute an unfair method of competition in violation of Section 5 of the FTC Act. Ryan, LLC sued the same day, moving for a preliminary injunction and seeking to vacate the Non-Compete Rule. The U.S. Chamber of Commerce and other employer associations joined the lawsuit as intervenor plaintiffs, also seeking to block the Non-Compete Rule.

On August 20, 2024, the U.S. District Court for the Northern District of Texas granted summary judgment to Ryan and the other plaintiffs, invalidating the Non-Compete Rule.¹ The Court’s Order set aside the Non-Compete Rule and prevented it from taking effect.

The FTC appealed the Court’s Order, and the appeal is currently pending before the Fifth Circuit Court of Appeals. A decision from the Fifth Circuit would normally be expected later this year. However, with a change in presidential administrations, many legal observers believe the FTC will abandon the Non-Compete Rule. The newly-appointed FTC Chair has been critical of the Non-Compete Rule.

Where does that leave things on enforceability of non-compete agreements?

If the Fifth Circuit upholds the lower Court’s Order, or if the FTC abandons the Non-Compete Rule, regulation of non-compete agreements falls to the state and local levels.

There is no outright ban on non-compete agreements in the State of Wisconsin. However, even without a ban on non-compete agreements in Wisconsin, they are generally disfavored under Wisconsin law.² In Wisconsin, non-compete agreements are “prima facie suspect” and are “liberally construed in favor of the employee.”³

The Wisconsin law on non-compete agreements is Wis. Stat. § 103.465, which states that a non-compete agreement is “lawful and enforceable only if the restrictions imposed are reasonably necessary for the protection of the employer or principal.” To be enforceable under Wisconsin law, a non-compete agreement must meet five requirements:

1. It must be necessary to protect the employer;
2. It must provide a reasonable time limit;
3. It must provide a reasonable territorial limit;
4. It must not be harsh or oppressive to the employee; and,
5. It must not be contrary to public policy.⁴

If a non-compete agreement violates any of these requirements, the entire agreement will be found void and unenforceable.

How can employers legitimately protect themselves from harmful employee competition?

A carefully drafted non-compete agreement can be enforced in Wisconsin. Work with your attorney to draft a non-compete agreement that is specifically tailored to your business in terms of the types of activities that are restricted, what products and/or customers are covered, and the geographical territory where the restrictions apply.

Consider whether it makes sense to have all employees sign a non-compete agreement, or whether you’d be better served by having only a few key employees sign non-compete agreements that are narrowly tailored to protect you against the types of harmful competition you might experience if those key employees left and competed. If you have every single employee sign the same non-compete agreement, regardless of their positions, you’re less likely to end up with an enforceable agreement. On the contrary, if you have non-compete agreements specifically drafted for key employees whose competition could legitimately harm your business, your chances of enforcing the agreement are higher.

Remember that non-compete agreements are not “set it and forget it” documents. Every few years, a Wisconsin court typically issues a new case discussing the enforceability of non-compete agreements in the state. If your non-compete agreements are several years old, contact your attorney to have the agreements reviewed.

Final Takeaways

Stay tuned for further updates on federal-level non-compete regulations, as we’ll know more about the final fate of the FTC Non-Compete Rule later this year. At the state level, work with your attorney to ensure your non-compete agreements are narrowly tailored to address Wisconsin’s requirements for enforceability.

¹ Ryan, LLC v. Federal Trade Commission, https://law.justia.com/cases/federal/district-courts/texas/txndce/3:2024cv00986/389064/211/.
² Star Direct, Inc. v. Dal Pra, 2009 WI 76, ¶19, 319 Wis. 2d 274, 767 N.W.2d 898.
³ Mutual Serv. Cas. Ins. Co. v. Brass, 2001 WI App 92, ¶6, 242 Wis. 2d 733, 625 N.W.2d 648.
⁴ H&R Block Eastern Enterprises, Inc. v. Swenson, 2008 WI App 3, ¶13, 307 Wis. 2d 390, 745 N.W.2d 421.