Hypotheticals can render restrictive covenants unenforceable

On July 14, 2022, the Wisconsin Court of Appeals ruled in favor of a former employee in a dispute over whether two uniquely worded restrictive covenants against him violated Wisconsin law. The case presents new considerations regarding what employers can and cannot include in noncompete clauses with severed employees.

Facts

Carlos Godina was hired by Diamond Assets LLC to work in sales and signed a contract that contained three provisions at issue in the case: two restrictive covenants (a noncompete agreement and a confidentiality agreement) and a severability clause. The employer asked the court to enforce the contract when he terminated his employment and sent an email containing “confidential” information to a third party.

The noncompete portion restricted Godina from engaging in activities:

• Similar to those he performed at Diamond;
• Competitive to its activities; and
• On behalf of its clients or customers to whom he was introduced who were “actually served customers” or “potential customers.”

The confidentiality agreement used both an “included” and “not included” section to define what is meant by “confidential information.” The “included” section stated that “Confidential Information will include all data and information relating to the business management of the Employer.”

The contract also contained a severability clause, which asked a court to modify the agreement to be enforceable if any provision was held unenforceable.