We live in a extremely contentious world where extremely paid executives and enterprise persons gain access to corporate trade facts and knowledge, customer lists and other possession information. Unlike prior times, these executives and other employees are extremely mobile, provocative between associates and jobs, even between competitors. Michigan courts and the Michigan legislature ave recently tried to deal with the realities of our 21rst century marketplace in dealing with the enforceability of non-compete agreements.
In Michigan, the validity of non-compete agreements is governed by section 4a of the Michigan Antitrust Reform Act, a statute passed by the Legislature in 1987, as well as the many cases interpreting that statute. Together, the statute and the case law set forth the parameters defining those agreements that are enforceable and those that are not. The statute seeks to attack a compromise between the protection of an employer’s contentious enterprise interests and an employee’s right to earn a living. As such, courts interpreting non-compete agreements focus their analysis in four areas:
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The deal must safe a company’s cheap contentious enterprise interest. Among the factors in determining whether the deal protects a cheap contentious enterprise interest are the employee’s position in the company, compensation paid to that worker and the level and amount of exact contentious facts acquired during employment, which may include such areas as trade secrets or extra training conferred on the employee.The deal must be cheap as to the distance of time the worker is prohibited from working in the line of business. Again, each case is 'fact sepcific' and numerous factors are analyzed in conclude what is a cheap distance fort non-compete contract.The deal must be cheap as to the geographic area the employer seeks to prevent the worker from working in. While the employee’s immediate area of employment would most likely be upheld as a cheap territorial restriction, wider restrictions require a greater showing that the deal seeks to safe the employer’s cheap contentious enterprise interest. The agreement’s restrictions on the type of employment or line of enterprise must be reasonable. Courts will look less conveniently on deliberately vague, over-reaching or “blanket” agreements.
Enforcement of Non-Compete Contracts Michigan courts have enforced and will inflict well-drafted agreements on a case-by-case basis, with remedies that include the issuing of restraining orders or injunctions and the awarding of monetary damages. It is foremost to note that even if one condition of a non-compete deal is deemed unenforceable, the remainder of the deal may be valid and enforceable. Businesses of all types, especially those with multi-state operations, must understand that the rules for non-compete agreements vary from state to state. What’s enforceable in Michigan may not be in one of our neighbor states. Moreover, employers should not delay in acting on known breaches of a non-compete agreement. The longer an employer delays between the discovery of unlawful competition and chase of a legal remedy, the weaker becomes the employer’s invite for injunctive relief.
Like any contract, non-compete agreements define the expectations of each party and are branch to negotiations, depending upon the bargaining vigor of the parties. Employers should have legal counsel help draft these agreements to ensure that they meet the employer’s expectations and are enforceable. Employees, on the other hand, should recapitulate such agreements determined to ensure that they understand the restrictions on time to come employment should they ever leave the company.
Also, be sure to remind those leaving your enterprise of their legal obligations during any exit interview. In this way, employers will attack a favorable, yet serious enterprise tone, while best ensuring that any non-compete deal can be enforced, should the need arise. I threat letter for any alleged violation is normally the first step to ensure the parties abide by non-compete terms and avoid litigation.
Michigan Non-Compete Basics