Michigan Business Law in Brief: Non-Compete Agreements in a Global Economy

Consider this. It’s 1990 and John is a door-to-door Hoover vacuum salesman in Detroit. Eureka lures him away and Hoover enforces a non-compete, non-solicitation or non-disclosure agreement prohibiting him from selling other vacuums within a 20 mile radius of his former territory for one month. Fair? Probably.

Same scenario, except 25 years later and John sells most of his Hoovers online. If Eureka were to lure him away in 2015, what type of non-compete agreement would be reasonable – and for how long? The answer likely depends on how the agreement is written.

Non-compete, non-solicitation and non-disclosure agreements are common in today's business world due to the ever increasing global nature of our economy. At Hickey, Cianciolo, Finn & Atkins, PC, we understand that these agreements are especially important for new Michigan businesses – and especially for those with an online presence. Having an agreement written correctly is important not only for those challenging it with a previous employer, but also for employers who need to create them for new business employees.

Location, Location, Location

This term certainly applies to more than just real estate. Non-compete, non-solicitation and non-disclosure agreements are largely based upon geographic locations. Limit the agreement to a one mile radius and a court will likely uphold it; make it global and you’ll likely be out of luck. It’s this “middle ground” that needs to be addressed wisely and where an experienced business law attorney can make sure that your interests are protected.

In addition to geographical location, there are generally three areas to consider when drafting a solid non-compete, non-solicitation or non-disclosure agreement – 1) timing, 2) reasonableness and 3) restrictions:

Timing. Non-compete agreements of short duration are more likely to be upheld than those which prohibit competition for long periods of time. Michigan courts may allow an agreement to cover more competitive geographical areas when that time is significantly limited.

Reasonableness. When a court seeks to determine the reasonableness of a contract, it will look at an employer's legitimate business interests, the nature of the employer’s industry and the time restriction itself. For example, John the vacuum salesman’s non-compete agreement will likely be limited as his product is common and widely available. However, if John were a scientist and privy to valuable trade secrets in a small industry, those restrictions may be much broader.

Restrictions. Non-disclosure, non-solicitation and non-compete agreements are restrictive in nature. However, agreements which significantly restrict what an ex-employee can do will be heavily scrutinized by courts in Michigan and elsewhere. In the past, the most common types of restrictive actions included making phone calls and sending letters or advertising materials. Today, social media such as Twitter, Facebook and Linked In add an additional "layer" of ways to reach clients and must be addressed in these types of agreements.

Sadly, there are no bright line rules to any of the above. Every agreement depends upon the facts and circumstances of each individual situation. That's why having an experienced Michigan business law attorney tailor your agreements to suit your company's objectives is extremely important.

Let Our Experience Help Protect Your Interests

Non-compete, non-disclosure and non-solicitation agreements are generally not cookie-cutter. They must be created to suit individual circumstances or they will simply not stand up in court to adequately protect your company’s trade secrets, intellectual property and confidentiality agreements, covenants-not-to-compete, employee training programs, computer usage policies and more.

Whether you're challenging an agreement with a previous employer or starting a business and need to draft new agreements, the business law attorneys at Troy, Michigan-based Hickey, Cianciolo, Finn & Atkins, PC can help. For over 30 years, we have proudly represented clients in Troy, Oakland County, metropolitan Detroit and throughout Michigan. We welcome you to contact the Law Office of Hickey, Cianciolo, Finn & Atkins, PC by calling 248-247-3300 or by using our online form.

Categories: Business Law