Non-Compete Agreements in Michigan: Statutory Rules
Michigan's Non-Compete Statute
Michigan is one of the states with a specific statute authorizing non-compete agreements. MCL 445.774a, part of the Michigan Antitrust Reform Act (enacted 1987), expressly permits employers to enter into reasonable non-compete agreements with employees.
Statutory Framework
Under MCL 445.774a, a non-compete is enforceable if it is reasonable in:
- Duration
- Geographic area
- Type of employment or line of business restricted
The statute explicitly authorizes these agreements, which reversed Michigan's prior common law position that had been skeptical of employment non-competes.
What Courts Consider Reasonable
Michigan courts evaluate reasonableness based on the totality of circumstances:
- Duration: Courts have upheld restrictions of one to three years. The appropriate duration depends on the industry and the nature of the information being protected. Two years is commonly accepted.
- Geography: Must be tied to the employer's competitive market and the employee's area of activity. Michigan courts have upheld statewide restrictions for employees with statewide responsibilities.
- Activity scope: Must be limited to the type of work that genuinely competes with the employer. Overly broad restrictions on any employment in an industry are disfavored.
Judicial Reformation
Michigan's statute explicitly provides that courts may reform overbroad non-competes. MCL 445.774a states that if a court finds a non-compete unreasonable, it should "limit the agreement to render it reasonable" rather than voiding it entirely. This is a significant employer-friendly provision.
Consideration
For new employees, the job itself provides consideration. Michigan courts have generally held that continued employment can serve as consideration for existing employees, particularly when the non-compete is presented alongside a change in job duties or access to new confidential information.
Red Flags
- Duration exceeding three years
- Geographic scope far broader than where the employee actually worked
- Restrictions covering unrelated types of work
- No legitimate business interest at stake
- Applied to employees without access to trade secrets or customer relationships
When to Consult a Lawyer
Consider consulting a Michigan employment attorney if you are negotiating a non-compete, changing jobs within your industry, or facing an enforcement action. Michigan's reformation statute means even an overbroad agreement may be partially enforced, so understanding your specific exposure is important.
This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.