Michigan Noncompete Agreement: What's Included and Enforceability

Quick Facts — Noncompete Agreement Lawyers

Is a Non-Compete Agreement Enforceable in Michigan?

Yes. Under Michigan law, non-compete agreements are enforceable as long as the contract is deemed reasonable by the courts in the following three areas:

  • The duration of the contract
  • The restricted geographical area
  • The type of employment or line of business

As legally binding contracts, non-compete agreements must also adhere to any laws that govern contracts. If a non-compete is missing any elements of a valid contract it could be ruled unenforceable.

How Long Does a Michigan Non-Compete Agreement Last?

Most Michigan non-compete agreements last between six months and three years. Three years is the maximum duration that courts have consistently ruled as reasonable for non-competes.

When determining if the duration of a non-compete is reasonable, courts will look at all the facts surrounding the case including the scope of restricted activities and the restricted geographic area.

How Do You Get Around a Non-Compete Agreement in Michigan?

To get around a non-compete agreement, an employee needs to prove to the court that the terms of the contract are unreasonable. This could be done by showing that the duration is too long, the geographic boundary is too larger, or the scope of the restricted activity is too broad.

Courts in Michigan are permitted to limit or edit overly broad or unreasonable non-compete agreements in favor of an employee to make the contract enforceable. This practice is called blue penciling.

What Voids a Non-Compete Agreement in Michigan?

A non-compete agreement will be void if it does not include all required elements of a valid contract. The elements necessary to form a contract are:

  • Offer
  • Acceptance
  • Consideration

In most cases, courts will allow continued employment to meet the requirements of adequate consideration for a non-compete agreement. The exception to this rule is if the employee is in a fixed term contract. In this case, there is no consideration and the contract could be void unless there is additional consideration like monetary compensation.

Frequently Asked Questions

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Employment

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Asked on Aug 1, 2023

Noncompete agreement and change of control?

I recently accepted a new position with a company that has requested that I sign a noncompete agreement. I understand the agreement and the limitations it puts on me, but I am concerned about how the agreement would be affected if the company is sold or changes ownership in the future. I would like to understand my legal rights in the event of a change of control.

Thomas L.

Answered Aug 4, 2023

If the future company buys the equity of your current employer, the Non-Compete continues in effect. If the future company buys the assets, the Non-Compete is terminated. I would request a sentence be added to the effect that "if there is a change of control of the Company (meaning more than 50% of the equity interest or 50% of the voting equity control) is sold or transferred, then this Non-Compete Agreement is terminated.

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Asked on Jul 12, 2023

Noncompete agreement and business partners?

I am a business owner who has recently acquired a new partner. We are in the process of drafting a Noncompete Agreement to ensure that neither of us will compete against each other in the same market. We are looking for advice on what should be included in the agreement and how it should be enforced.

Daniel D.

Answered Aug 4, 2023

The one thing to make sure with noncompete agreements is that it is reasonable in terms of duration and the area you cannot compete in. Courts use a reasonableness test to determine whether a noncompete agreement is valid. If provisions are deemed to be unreasonable and fail the test, they could be altered or struck out of the agreement.

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Asked on Jul 25, 2023

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I recently accepted a job offer with a new employer who asked me to sign a noncompete agreement. I am concerned that the agreement may not be in line with public policy and wanted to get a professional opinion from a lawyer to make sure I am not putting myself in a difficult situation.

Merry K.

Answered Aug 8, 2023

If you are in Washington State, where I'm licensed, as opposed to D.C., please let me know what kind of help you are looking for - have you already signed the agreement? I've been a WA State attorney for nearly 38 years, and specialize in employment law.

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Employment

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Asked on Jun 4, 2023

Noncompete agreement and industry restrictions?

I recently signed a Noncompete Agreement with my current employer. I am looking to explore other opportunities in my industry and want to know what restrictions my noncompete agreement might have on me. I am interested in understanding the limitations of the agreement and if there are any potential implications of taking a job in the same industry.

Danielle G.

Answered Jul 11, 2023

In order to ascertain the limitations and implications, you would need to review the specific language of the agreement. If the non-compete is very broad, it's possible it would not be enforceable. In New York, for a non-compete agreement to be enforceable, it must be for a reasonable period of time and limited geographic scope. It also must protect the employer's legitimate interest. For example, the restrictions must protect confidential information or specialized skills you gained while on the job, or some other legitimate interest. If the agreement goes beyond those limitations, a court could find the non-complete to be unreasonable and unenforceable, in whole or in part. As to what restrictions your specific non-compete imposes (and the reasonableness of those restrictions), you would need to look at the specific language in the agreement. If you are unsure about the limitations, you should seek advice of counsel to help decipher the extent it would apply to your industry in general, and the likelihood it would be enforceable in court.

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Asked on Jul 30, 2023

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I recently left my job of 5 years, where I had signed a non-compete agreement. I am now negotiating a severance package with my former employer and am unsure of what my rights and obligations are regarding the non-compete agreement. I am seeking clarification on how the non-compete agreement should be handled in relation to the terms of my severance package.

Diane D.

Answered Sep 1, 2023

To be able to answer this question, I would need to see the agreements. No one can answer your question without seeing the agreements.

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