Understanding Michigan Non-Compete Agreements

There is a substantial amount of paperwork involved in the on-boarding process for a new employee. One of the documents that a new employee may be asked to sign is a non-compete agreement . Some people do not give a a second thought before signing a non-compete agreement, but for many, that could prove to be a mistake. It is important for everyone to consider the consequences of signing a non-compete agreement, and consulting with a corporate law attorney in Michigan can help a prospective employee make the best decision possible.

The Nature of Non-Compete Agreements

In Michigan, a non-compete agreement is only enforceable in a court of law if it is reasonable. This requirement has been upheld in numerous court cases including Innovation Ventures LLC v. Liquid Manufacturing LLC , in which the Michigan Supreme Court held that a noncompete provision must be evaluated for reasonableness.

To determine whether a statement is reasonable, there are several elements that a court will consider:

• The type of business, industry, or position involved. This category involves the type of activity that the worker is prohibited from doing. A reasonable noncompete agreement might limit a former worker from working in a small niche within a company. A noncompete agreement that prohibits a worker from functioning in an industry in any degree, however, would likely be found unreasonable.
• The duration of the non-compete term the worker must follow. An agreement will be found unreasonable if it prohibits a worker from being employed for too long a period of time. For example, a noncompete agreement that restrict a worker from being employed for 10 years would likely be found unreasonable, but a one-year restriction is often found to be reasonable.
• The geographic location mentioned in the agreement. Noncompete agreements are often found to be unreasonable if they prohibit a worker from being employed in too large an area. While a noncompete agreement that prohibits a person from working in the United States would likely be found unreasonable, an agreement that prohibited a worker from being employed in a several mile radius would likely be found reasonable.
• The business interest that the agreement seeks to protect. This factor refers to a specific advantage that the worker might be able to use in competition against a former employer. Noncompete agreements must specify about what exact unfair advantage is involved. For example, an unfair advantage might include awareness of confidential information, knowledge of a customer base, and unique training.

It should be noted that this reasonableness standard only applies to employee noncompete agreements. Commercial non compete agreements follow a different standard. In either case, to make sure that a non-compete agreement is reasonable, it is often a wise idea to speak with a knowledgeable lawyer.

Speak with an Experienced Bankruptcy Law Attorney

If you are a worker who is attempting to challenging a non-compete agreement or a business founder seeking to craft an enforceable non-compete, an experienced corporate law attorney can help. Contact the Resnick Law, PC today to schedule an initial free case evaluation.

(image courtesy of Marten Bjork)