WISCONSIN SUPPORTS EMPLOYERS’ RIGHT TO NON-COMPETE

By Kathleen Bray

Eugene Dal Pra was a route driver for Star Direct, a distributor of products to convenience stores, service stations, truck stops and the like. He quit and started his own rival distribution company. The non-compete in question was intended to prevent Dal Pra from engaging in business “substantially similar to or in competition with” Star Direct and forbidding him from approaching customers. In addition to this “business clause” and “customer clause” the contract included a “confidentiality clause.” The lower courts had found the business clause too broad and concluded that, if one clause fails, none could be enforced because they are indivisible. In order to be enforceable the Supreme Court in Wisconsin suggested that an employer must have a legitimate protectable interest and in this case it was special knowledge of its business practices and customer access by a sales person in a competitive, relationship-based industry that was protectable. The Court found that the “substantially similar” business language was too broad and was not enforceable, as it would apply to non-competitive businesses. However, an unreasonable clause will not make the rest of the contract unenforceable as long as it is divisible, which means that after the unreasonable portion is stricken, the other provision or provisions may be understood and independently enforced. Finding it divisible the Court enforced the “customers clause” that prohibited solicitation for 24 months of all current customers and past customers, who had been lost for one year or less for which the employee performed service or otherwise dealt with or to which he had special knowledge as a result of his position. Past customers not more than a year old were included as the competing employee would have a distinct competitive advantage. This case was a significant victory for employers who have legitimate protectable interests. Star Direct, Inc. d/b/a Star Distributing v. Dal Pra (Wis. Sup. Ct. 2009).

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