In most states, noncompete clauses are permitted as long as the restrictions are reasonable. In Wisconsin, reasonable covenants not to compete are allowed based on the principle of freedom of contract and exchange of consideration. However, what constitutes a “reasonable” restriction is not clearly defined. Some courts have found that non-compete clauses that prevent parties from working in similar, but not identical, industries are too broad to be considered reasonable. In Karpinski v. Ingrasci, the court determined that a dentist could use a non-compete agreement to temporarily prevent a former employee from practicing dentistry, but not oral surgery. Courts generally do not uphold non-compete agreements that completely prohibit former employees from finding new employment, as these clauses are viewed as punitive measures to discourage employees from quitting.

A small number of states almost completely prohibit the use of non-compete agreements. For example, California law prohibits almost all covenants not to compete. In the case of Edwards v. Arthur Anderson, the California Supreme Court held that the law should be strictly interpreted and not only render “unreasonable” non-compete clauses void, but all non-compete clauses except for those specifically permitted in the legal code.