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Steven H. Schwartz & Associates, P.L.C.

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Covenants Not to Compete

Schipper | 04 August, 2006 12:11

Employers frequently require employees to enter into agreements limiting the employee's ability to work for a competitor or to operate a competing business within a certain amount of time after departing the employer's business. Following the Michigan Antitrust Reform Act ("MARA"), Michigan courts enforce non-compete agreements that they find to be reasonable.

The MARA requires reasonableness of the agreement in four respects. The agreement must 1) protect the employer's reasonable competitive business interest, 2) be reasonable in duration, 3) be reasonable in the geographical area in which it restrains competition, and 4) be reasonable as to the type of employment or line of business prohibited.

Generally speaking, a reasonable non-compete agreement will be just restrictive enough to protect an employer's legitimate business interests while allowing the employee to earn a living. However, the application of the above stated factors is very fact intensive. A non-compete agreement that is enforceable under a certain set of facts may very well not be enforceable in another. For this purpose it is recommended that employers not simply use boilerplate language in their non-compete agreements but rather tailor the agreement to the specific needs of the employment relationship. Further, it is advisable to contact an employment attorney to research prior judicial enforcement of agreements in similar employment relationships.


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