Non-Compete Agreements

As an employer, you deserve to benefit from the investments you’ve made in your workforce. That investment includes the cost of developing your employees’ skills and providing them with the proprietary information that gives your company its competitive advantage. You can protect these investments by having key employees sign non-compete agreements which prevent them from using their skills and insights into your company from working for a competitor or going into business on their own.

However, non-compete agreements become unenforceable when they fail to conform to certain legal requirements, undermining their entire point. That’s why it’s important to craft them with the help of an experienced law firm that provides legal protection and guidance for you and what you care about. Contact Head Murphy Law today for a confidential meeting with an experienced non-compete agreements lawyer serving Michigan businesses. Our attorneys look forward to meeting you, learning about your business, and explaining how we can support its interests.

When Non-Compete Agreements Lead to Litigation

Disputes involving non-compete agreements can escalate quickly when a business believes its competitive advantage is at risk. These matters often require immediate legal action to enforce restrictions or defend against overreaching claims.

How Non-Compete Agreements Work in Michigan

Non-compete agreements restrict a person, such as an employee or the seller of a business, from competing with the company with whom they have entered the agreement. A non-compete agreement does not allow a company to prevent others from engaging in legitimate marketplace competition. Instead, non-competes seek to protect a company’s legitimate business interests, such as its business relationships, confidential information, or investment in developing employees’ specialized skills and experience. Employers frequently use non-compete agreements in industries or employee roles where employees may possess knowledge or skills that give the employer a competitive advantage over other companies in its industry or line of business. For example, non-compete agreements are common in the tech industry, for workers in sales roles, and for executive-level positions.

A company may present a non-compete agreement at various points in an employment or business relationship, such as:

At the beginning of an employee’s employment
In connection with an employee’s change in role, increase in responsibilities, or promotion
In exchange for offering additional compensation to an employee, such as equity compensation
As part of a severance agreement
In the context of the acquisition of another business (with non-competes presented to the other business’s owners, executives, or key employees)

What Business Interests Can Non-Competes Protect?

Examples of a company’s business interests that it may use a non-compete to protect include:

Trade secrets, such as proprietary formulas, confidential R&D, marketing plans, business strategies, and pricing lists
Customer or vendor relationships and goodwill, especially when employees have personal relationships with vendors and clients
Unique or specialized training provided to employees by an employer
The investment into purchasing a business from a former owner subject to a non-compete agreement

Can You Enforce Non-Compete Agreements in Michigan?

Michigan’s Antitrust Reform Act allows employers to enforce non-compete agreements with employees, subject to certain limitations. Under the law, an employer may enter a non-compete with an employee to protect the employer’s reasonable competitive business interest by expressly prohibiting the employee from engaging in employment or lines of business during and after their employment if the agreement has a reasonable scope for its duration, geographical area, and type of employment or line of business. An enforceable non-compete agreement must also meet the standard requirements for all contracts, such as mutual assent by both parties and an exchange of consideration (something of value). Because non-compete agreements are contracts, disputes over enforceability may involve broader vendor contract disputes and other commercial agreement issues.

Michigan allows courts to modify or “blue pencil” non-compete agreements found to have too broad a scope. A court may limit the scope of a non-compete sufficiently to render it reasonable under the circumstances of an employer-employee relationship and then enforce the agreement as limited. Michigan law governing non-compete agreements is outlined in the Michigan Antitrust Reform Act.

Limitations on Non-Compete Agreements

A non-compete agreement must bear a reasonable relationship with an employer’s legitimate protectable business interests. Courts typically will not enforce non-compete agreements with overly broad scope, or those designed solely to punish employees (such as in severance agreements) or to eliminate legitimate economic competition. Non-compete agreements typically have limitations regarding:

Duration: Courts usually find non-compete agreements lasting six months to a year reasonable, with longer agreements reasonable only in limited circumstances that justify an extended restriction on a person’s ability to engage in specific kinds of employment or business.
Geographic scope: Courts may not enforce non-compete agreements that cover geographic areas where the employer does not have an established market.
Types of employment: Employers may not usually restrict employees from performing job duties outside the scope of work they performed for the employer.
Lines of business: Non-compete agreements typically may not have a scope that extends beyond the employer’s current line(s) of business.

Non-Compete Agreements in Michigan Business Sales

In addition to entering into non-compete agreements with employees, companies may also negotiate non-competes in the context of a business purchase. A buyer may ask the seller and the acquired company’s executives or key employees to enter non-compete agreements as a condition of purchasing the company. In the context of a business purchase and sale, a non-compete agreement protects the buyer’s goodwill and customer relationships. In certain circumstances, a non-compete in a business sale may have a broader scope than a court would find reasonable in a standard employer-employee non-compete agreement.

Enforcing Non-Compete Agreements in Michigan

In the event that a party has violated a non-compete agreement they’ve signed with you, it’s important that you consult with a business litigation law firm immediately. Enforcing these agreements often requires formal business litigation to stop competitive activity and protect your company’s interests. An experienced attorney can review the terms of your agreement and help you understand your legal options for it. They may start by sending a cease-and-desist letter to ask the party to stop engaging in prohibited competitive conduct.

Next, they can help you pursue various forms of relief for the breach, such as injunctions, to temporarily stop alleged competitive conduct pending resolution of a dispute or permanently preclude future breaches. They can also seek financial compensation for losses that resulted from the breach of the non-compete, such as lost sales, as well as pursue legal claims against another company that induced a former employee to violate their non-compete.

Why Choose the Farmington Hills Lawyers of Head Murphy Law to Help Your Business with Non-Compete Agreements?

Drafting and enforcing non-compete agreements are legally complex issues which is why it’s so important that you make the right choice when hiring the lawyers who will handle these tasks for you. Turn to the Farmington Hills business attorneys from Head Murphy Law to help your company negotiate or enforce a non-compete agreement because of our:

Compassionate counsel: Our attorneys know that legal matters involving your business can be a source of considerable stress. Let us take the burden of your case off your shoulders so you can focus on running your company.
Team approach: We work as a team, which means that when you choose our law firm to assist you with non-compete agreements, you benefit from our lawyers’ collective knowledge and experience. We’ll take a collaborative approach to resolving your case effectively.
Personalized legal strategies: Our Farmington Hills lawyers will craft our legal strategies to your unique needs, concerns, and goals. At the same time, we understand the importance of a flexible approach to ensure we protect your interests now and in the future.

Contact Our Law Firm Today to Discuss Your Business’s Non-Compete Matters

Whether your business wants to negotiate non-competes with your employees or enforce an agreement against a party that has violated their restrictions, you need legal protection and guidance from an experienced legal team. Contact Head Murphy Law for a free, confidential consultation with a Farmington Hills business attorney to learn more about non-compete agreements and how they can help your company protect its legitimate business interests.