We live in an interesting time with a severe downturn in the economy dominating the news. For many Michigan citizens, this downturn means unemployment through layoffs and terminations. Many employees mindlessly sign non-compete agreements when they start their jobs, thinking that they will work for the employer indefinitely into the future. When their employment is terminated, they are confronted with an overly broad non-compete agreement which essentially says they can't work in their chosen profession anywhere in the state of Michigan or, sometimes, globally. Will Michigan courts enforce non-compete agreements like they have over the last decade?
Most Michigan judges fail to analyze non-compete agreements as required under the Michigan statute. They simply take the attitude that "Well, you signed a non-compete. It's a contract. You're stuck." In point of fact, judges are required to analyze the non-compete for reasonableness in terms of duration, geography, scope and all other aspects. This is a very fluffy test which allows courts tremendous discretion.
Is the fact that the United States is in the worse recession since the Great Depression one of the factors the court can consider in determining whether or not a Michigan non-compete agreement is enforceable? Does the fact that Michigan's economy is one of the worst in the nation during this recession count under the non-compete factor?
There is little question that the statute requires judges to consider all variables in determining whether or not to enforce a non-compete in the first instance and secondly, whether or not the terms need to be structured as more reasonable. Given the current economic state, courts should be more circumspect in applying non-compete agreements. Only time will tell whether Michigan judges reverse the trend of blindly enforcing non-compete agreements as though they were standard contracts.
Enrico Schaefer is the founding attorney of Traverse Legal, PLC, a law firm specializing in non-compete, trade secret, confidentiality matters and also in minority shareholder rights litigation. To find out more about non-compete contracts and trade secret law, you may contact a Michigan Non-Compete Attorney or Traverse Legal's non-compete law resource page.
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