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Michigan’s multi-factor test for evaluating noncompete agreements

| Mar 10, 2020 | Employment Contracts |

We stress an immediately key point on our website at the established pro-worker firm of Sterling Employment Law in Bloomfield Hills for managerial and other top-end employees of Michigan companies.

Many of those individuals are presented with employers’ demands to sign covenants not to compete if ever terminating employment and assuming a position with a business rival. We urge any such worker tasked with executing a noncompete agreement to secure proven legal guidance before doing so, given that such contracts “are typically drafted heavily in an employer’s favor.”

Although soliciting early guidance where a noncompete pact is concerned is certainly advisable, failure to do so does not bar an affected employee’s future right to challenge a noncompete on grounds of fairness and/or enforceability.

Indeed, it is sometimes an employer’s very inclination to play hard ball in the drafting of such a document that results in its judicial tossing.

Here’s why: To be held legally enforceable in Michigan, a noncompete agreement must be deemed by a court to be broadly “reasonable.”

That assessment gives an experienced pro-employee legal team considerably broad parameters to work within when evaluating the balancing to be gauged between a company’s legitimate need for future protections and a departed worker’s right to make a living.

We note on our website what is essentially a four-factor test that state courts employ when construing reasonableness. They zero in closely on these points:

  • The type of business sought to be protected
  • Geographical reach (Does a company seek to bar a former worker from hooking up with a local competitor or with a company anywhere else in the world?)
  • Duration (e.g., a one-year ban versus a lifetime bar)
  • The competitive interest sought to be protected

These factors will be collectively considered. An experienced pro-worker legal team can push hard for invalidation or modification of a noncompete agreement with provisions that point to an employer’s unreasonable efforts to restrict future work opportunities.

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