Michigan enforces non-competes that protect reasonable business interests and are reasonable in scope.
The Michigan Antitrust Reform Act allows an employer to obtain an agreement not to compete that is reasonable in duration, geographic area and the type of employment or line of business it restricts.
The basics for employers.
A plain-English summary. This is general information, not legal advice, and the rules change, so check the current text.
Reasonable Interests
The covenant must protect the employer’s reasonable competitive business interests, such as confidential information and customer relationships.
Reasonable Scope
It must be reasonable as to duration, geographical area and the type of employment or line of business.
Judicial Limits
A court may limit an agreement that is unreasonable in some respect to make it reasonable.
How it plays out.
Courts look at the facts of each role. A covenant that is narrowly tied to the employee’s access to confidential information and customers is easier to defend than one that applies to every employee in the same way.
Michigan does not require the covenant to be signed at hire, but consideration and timing matter, and an attorney should review the practice for existing employees.
Keep a signed copy with the personnel file and make sure the employee’s duties match the interests the covenant is meant to protect.
Where this shows up in your plan.
Severance and continued coverage are often offered in return for a covenant. The agreement should state exactly what is provided and what ends the benefit.
Do not end coverage in a way that conflicts with COBRA or the plan terms because of an alleged covenant breach without legal advice.
Align the covenant with the offer letter and the plan documents so the three say the same thing.
Setting it up.
Define the Interest. Write down the interest each covenant protects.
Limit the Scope. Set duration, geography and role to what is needed.
Align the Package. Match severance and benefits terms to the covenant.
Have Counsel Review. Send each form to an attorney.
Mistakes to avoid.
One Form for Everyone. The covenant should fit the role.
Overbroad Terms. Unreasonable terms may be cut back.
Conflicting Benefit Terms. The agreement and plan should agree.
Laws and Rules Referenced
Michigan Antitrust Reform Act, MCL 445.774a — The standard for agreements not to compete.
ERISA section 510, 29 U.S.C. 1140 — Interference with protected benefit rights.
COBRA, 29 U.S.C. 1161 — Continuation coverage after separation.
Quick answers.
Short answers to what employers ask most. This is general information, not legal or tax advice.
Are non-competes legal in Michigan?
Yes, when reasonable in duration, geography and type of employment and tied to a legitimate business interest.
Can a court rewrite a covenant?
A court may limit one to make it reasonable.
Can we cancel coverage for a breach?
Talk to an attorney first.
Does it have to match the plan documents?
Yes, the terms should be consistent.
More employment law guides for Michigan employers.
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