In Michigan, an 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 noncompete or non-solicitation agreement is very common.
Is there a standard noncompete agreement? No. While it is not uncommon for an employer to have a noncompete or nonsolicitation agreement that covers the first six 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 noncompete agreements difficult to enforce? Yes and no. In many ways, a breach of a noncompete 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 to 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 monetary 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 his or her 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 noncompete or nonsolicitation agreement be made a condition of employment or the continuation of employment? Yes. In fact, there is Michigan case law that says no additional consideration (beyond continued employment) must be exchanged to support the enforceability of a noncompete agreement.
What can employees do if they are told that they must sign a noncompete agreement in order to keep their job? They can object to unreasonable restrictions and attempt to negotiate restrictions that are reasonable. Resourceful employees 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 a 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 noncompete agreement.