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Using Michigan’s noncompete law

On Behalf of | Feb 15, 2016 | Employment Litigation |

If you want your employees to sign a noncompete agreement when they are hired by your business, you want to be certain that those agreements would be valid and enforceable. As the employer, you may wish to make your agreement as inclusive as possible to limit the potential for harm to your business should an employee decide to leave.

This may not be the best strategy. Noncompete agreements fall broadly under the heading of trade restrictions, as they restrict someone from competing in a trade or business. This is permitted in Michigan, as codified in statute section 445.774a and is why this is part of the Michigan Antitrust Reform Act.

An important element to ensure the enforceability of a noncompete agreement is the reasonableness of the agreement. Use of a standard form with boilerplate language is risky, as each noncompete should be tailored to the specific job and employee.

It is unlikely that everyone in your business has access to proprietary and confidential information or possesses such unique skills that should the leave and go into business they would damage your business.

A secretary or office clerk’s agreement should look different than that of your prize salesperson.

As part of this, the agreement needs to be reasonable. The Michigan statute notes that the employer’s “reasonable competitive business interests” may be protected if the agreement is “reasonable as to its duration, geographical area, and the type of employment or line of business.”

This is true of most states that allow noncompete agreements. They can only restrict employment for a reasonable period, within a reasonable geography and for a specific type of work or business.

If you operate a single beauty salon, and it was located in the Pontiac, imposing a restriction for all of Livingston, Oakland, Macomb, Jackson, Washtenaw and Wayne Counties is likely to be found unreasonable.

Courts in Michigan may modify an agreement to make it enforceable, but a safer course of action is to draft an agreement that is sufficiently specific to your situation as to prevent the need for such reformation.


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