The forfeiture trap hidden in the retirement plan just unravelled under the state's non-compete statute
A Wisconsin appeals court has thrown out a clinic's retirement-plan non-compete, putting employers on notice over forfeiture clauses tucked inside benefits plans.
Burt J. Steffes joined Fond du Lac Regional Clinic in 2009 and became a shareholder-employee two years later. As part of that move, he signed a standard non-compete in his employment contract. He also enrolled in the clinic's supplemental retirement plan. In 2017, the plan was amended, and the version in force when he left contained its own non-compete tied directly to his retirement benefits.
That second non-compete is what tripped him up – and what the court ultimately threw out.
The plan said that if a participant left before age 65 and competed within two years, the entire account balance, both vested and unvested, would be forfeited in full. Competition was defined broadly. It covered practicing medicine in any of nine listed Wisconsin counties, working for Aurora Medical Group, or working for the clinic's affiliated health system without prior written consent.
Steffes resigned in October 2018, 90% vested. He opened Dermatology and Cosmetic Physicians, S.C. outside the 10-mile radius in his employment contract, but inside Washington County, one of the counties named in the plan. He asked the plan to waive the restriction. It refused. Plan Administrator Kate M. Cole then denied his benefits claim, finding he had competed with the clinic's affiliated system.
He sued. The circuit court sided with the clinic, ruling that Wisconsin's non-compete statute, Wis. Stat. § 103.465, did not apply to a retirement-plan clause, and that the covenant survived the common law rule-of-reason test.
On May 27, 2026, the Wisconsin Court of Appeals, District II, reversed. The three-judge panel held that the plan's covenant fits squarely inside the plain language of § 103.465. The statute makes any post-employment non-compete enforceable only if the restrictions are reasonably necessary to protect the employer. Anything broader is void in its entirety.
The panel relied heavily on Holsen v. Marshall & Ilsley Bank, a 1971 Wisconsin Supreme Court decision that applied the same statute to a forfeiture clause in a profit-sharing and retirement plan. Under Holsen, the court said, a forfeiture-of-benefits provision tied to competition is enforceable only if it satisfies § 103.465. Same facts, same rule.
The clinic urged the court to follow a 2010 court of appeals case, Selmer Co. v. Rinn, which had narrowed the statute to covenants imposed as a condition of employment or under unfair bargaining conditions. The panel acknowledged the tension but said supreme court precedent controls when there is a conflict between the two.
Because the clinic did not actually dispute that the covenant would fail the statute's reasonableness test, the analysis stopped there. The order was reversed and the case sent back to the circuit court.
For HR and benefits teams, the message is direct. A non-compete buried inside a retirement, deferred-compensation, or profit-sharing plan is not insulated from non-compete law. It will be measured against the same statutory standard as a stand-alone clause in an employment contract. If the geography or duration sweeps too wide, the whole thing can fall – taking the forfeiture mechanism with it.
That has practical consequences for plan design. Employers who lean on broad forfeiture-for-competition language as a retention tool may find the language unenforceable at the very moment they most want to use it. Tighter geographic boundaries, shorter durations, and a real link to a protectable interest are the safer route.
There is also a clean evidentiary lesson here. Steven Little, the former president and CEO of the clinic's affiliated health system, acknowledged in deposition that the covenant was very broad and explained that it was designed to stop physicians from leaving and competing, to offset generous compensation, and to give the system a competitive advantage over its single-largest rival. Statements like that, made under oath by senior leaders, can become exhibit A when a court is asked whether a covenant goes further than necessary.
