A non-compete agreement is not only a helpful way to avoid losing good employees to a competitor but it also can help preserve trade secrets and sensitive business information. As such, if you have employees and information you do not want the competition to get a hold of a non-compete clause should be included in your employment contract or a separate non-compete agreement should be added.
What should be included in a Non-Compete Agreement?
Michigan law allows for you to include anything you want in a non-compete agreement, however, it must be reasonable in time, scope, and geography. To the extent any such agreement or covenant is found to be unreasonable in any respect, a court may limit the agreement to render it reasonable in light of the circumstances in which it was made and specifically enforce the agreement as limited.
What is a reasonable time limitation in a Michigan Non-Compete?
In Michigan, any "reasonable" time limitation will be enforceable. While the statute itself does not limit the timeframe, Michigan case law would indicate that it is likely best not to go beyond two (2) years. In Michigan, some courts have enforced a two (2) year time period and others have not. As such, as a general rule of thumb, a time limitation of less than two (2) years increases your chances that a Court would enforce the non-compete.
What is a reasonable geographic restriction in a Michigan Non-Compete?
The broader the non-compete is in geographic limitations the higher risk you run that a Michigan Court would not enforce it. For example, if the non-compete was for anywhere in the entire world, the Court may not view that as reasonable depending upon the business you are engaged in. As such, it is best to limit the geographic region to markets that you compete in. The more specific you are the more likely the non-compete will be enforced.
What is a reasonable restriction on the scope of activities restricted in a Michigan Non-Compete?
Similar to the other factors, the broader the scope the less likely a Michigan Court would find the non-compete reasonable. For example, if you restricted employment of any kind whatsoever a Court would likely deem that unreasonable. As such, it is best to restrict it to specific job descriptions or activities that you would want to prevent that person from engaging in.
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