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A bill proposing to strengthen "noncompete" agreements — which limit a departing employee's ability to work for his company's competitors — may force state legislators to choose between two powerful forces: big business and free markets.

Under noncompete agreements, employees typically are restricted from performing similar work for a specific period of time within a certain geographical area.

Wisconsin is one of the friendlier states toward employees in terms of noncompetes, said Geoff Trotier, an employment lawyer at von Briesen & Roper in Milwaukee.

The proposed bill would radically change that, Trotier said.

Supporters say the changes would help persuade national companies to relocate in Wisconsin and reduce litigation that stems from uncertainties in the existing law.

Opponents call the proposed changes an attack on free markets that would limit the movement of individuals and ideas, and therefore the speed of innovation.

One of the bill's main provisions would be to change the current practice of "red penciling," which negates an entire noncompete agreement if a judge finds one clause onerous. A "blue penciling" provision in the bill would allow judges to revise overly broad clauses but keep the rest of the agreement in place.

"Blue penciling would either put us on par with or ahead of Illinois in terms of how our judges can look at these restrictive covenants," said Daniel Finerty, an employment lawyer at Lindner & Marsack in Milwaukee. Finerty played a part in drafting the bill, according to Legislative Research Bureau files.

Stronger noncompete agreements would help lure more companies from Illinois to Wisconsin, Finerty said.

"If Wisconsin's economic development strategy is premised on luring companies from Illinois, that's horrible," said Dane Stangler, vice president for research and policy at the Ewing Marion Kauffman Foundation, a Kansas City nonprofit focused on entrepreneurship and education.

Most of the research about offering incentives to attract companies from out of state shows there are far better uses of public money, and the promised jobs payoff rarely happens, Stangler said. Also, the companies that come tend to be manufacturing companies, which are increasingly capital intensive, not labor intensive, he added.

To Stangler, the debate about strong vs. weak noncompete agreements comes down to a simple point:

"If your public policy goal is big-company corporate, then maybe strict enforcement of noncompetes is better for you," Stangler said. "But when you're interested in entrepreneurship and economic dynamism, we advocate for nonenforcement or lax enforcement."

Many cite California as an example of a state with booming entrepreneurship that does not enforce noncompetes. But Stangler said a better example of their impact is Michigan, where an inadvertent change to the law in 1985 strengthened enforcement of noncompetes. Controlling for the effects of the auto industry decline, researchers found an almost immediate exodus of scientists and engineers from Michigan after the change, Stangler said.

Over time, even Michigan companies became disillusioned with noncompete agreements, according to a paper published by researchers at Harvard Business School and the University of North Carolina. "Ultimately...policy planners must decide when the interests of incumbent firms outweigh those of individual careers and possibly regional development," the authors said.

Not only do noncompete agreements limit competition, they can inflict what might be thought of as a tax on employees' earning power by drastically limiting their ability to seek higher-paying jobs, said Joe Kirgues, co-founder of gener8tor, a start-up training program, in a recent posting on JSOnline.com's OnRamp blog.

"It's not good for all of us if our workers are declared ineligible to compete," Kirgues said.

For the companies, however, it is difficult to teach an employee the business, make introductions and share strategies and pricing information, then watch an employee take all of that to a competitor, Trotier said.

A former human resources professional, Rep. Mike Rohrkaste (R-Neenah), said he believes companies should be able to ensure there is a reasonable amount of time between an employee's departure and that person's efforts to hurt them competitively. The proposal could help employees, too, because a judge would be able to strike out or temper a clause in a way benefiting the employee, while leaving the rest of the agreement intact, he said.

"My bigger objective was to allow a judge to be a judge and make a reasonable decision," said Rohrkaste, one of the bill's co-authors.

The bill would also make court attitudes toward noncompete agreements more predictable, Trotier said. "My sense is most companies would be happy to have a little more guidance, which this law provides," he said.

The noncompete bill faces an uncertain fate until lawmakers deal with the state budget. Rohrkaste said he is not aware of any efforts to slip the bill's provisions into the budget in the next few weeks.

Lobbying for stronger noncompetes are 3M, Independent Insurance Agents of Wisconsin, Professional Insurance Agents of Wisconsin, Wisconsin Broadcasters Association and Wisconsin Manufacturers & Commerce. Lobbying against it are the Wisconsin Realtors Association and Wisconsin State AFL-CIO.

Jason Stein of the Journal Sentinel staff contributed to this report.