In Michigan, employer may obtain from an employee
an agreement that protects the employer's reasonable competitive business interests and expressly prohibits an employee from
engaging in employment or a line of business after termination of employment if the agreement is reasonable as to its duration,
geographic area and the type of employment or line of business. Litigation seeking to remedy a breach of a non-compete
or non-solicitation agreement is very common.
Is there a standard non-compete
agreement? No. While it is not uncommon for an employer to have a non-compete or non-solicitation agreement that
covers the first 6 months or one-year after termination of employment, or a 50-mile or 100-mile radius from the employee's
assigned office, what may be a reasonable duration or geographic area for one company in a certain industry may be entirely
unreasonable for another company in a different industry.
Are non-compete agreements difficult to enforce? No and yes. In many ways,
a breach of a non-compete agreement case is no different than any other breach of contract lawsuit. However, Michigan
law permits the Courts to review these agreements to determine if they are “reasonable” with respect duration,
geographical area and the type of employment or line of business the agreement is seeking to protect.
There are two areas of relief that are typically
pursued in these types of cases. First, there is the claim for money damages caused by the breach of the
agreement. Examples of such damages would be lost business profits, revenue and lost customers.
If a former employee's signature is on the written agreement and the agreement complies with the "reasonableness"
requirements, the evidence of the former employee's breach and damages caused by the breach can be easy to develop.
Second, there is a claim for Injunctive relief. This
is where the former employer is asking the Court to remedy the breach of the agreement by ordering the former employee to
immediately stop unfairly competing. This usually involves ordering the former employee to stop working
in their new business and/or stop calling on customers and clients for a certain period of time. This type of claim is
also subject to the reasonableness requirements.
Can the execution of a non-compete or non-solicitation agreement
be made a condition of employment or the continuation of employment? Yes. In fact, there is Michigan case law
that says that no additional consideration (beyond continued employment) must be exchanged to support the enforceability of
a non-compete agreement.
What can an employee do if he or she is told that they must sign a non-compete agreement in order to
keep their job? They can object to unreasonable restrictions and attempt to negotiate restrictions that are reasonable.
A resourceful employee who can illustrate the unreasonableness of the restrictions and also propose reasonable alternate terms
and restrictions, may very well be able to obtain an agreement on their proposed revisions and may also put themselves in
position where they are legally protected from a retaliatory termination. On the other hand, a prospective employee can be
turned down, and an existing employee can be terminated, for refusing to sign a reasonable non-compete agreement.