USE OF NON-COMPETE AGREEMENTS ON THE RISE

Author: David S. Lefere
Date: 10/06/2009

In the past few years, we have seen an increase in the use of Non-Compete Agreements, which are often used to protect a company’s investment in a key employee by preventing the key employee from leaving their job and competing with their prior employer. Many mistakenly believe in the dangerous misconception that a Non-Compete Agreement is unenforceable. While some states completely prohibit Non-Compete Agreements, Non-Compete Agreements are enforceable in Michigan so long as they are ‘reasonable’. They must be reasonable in terms of time, geography, and scope of work. Of course, the use of the term ‘reasonable’ means that the enforceability of a Non-Compete Agreement is a gray area, subject to the interpretation of the Court. However, if the Court finds a Non-Compete Agreement to be unreasonable, the Court cannot rule that the Non-Compete Agreement is unenforceable. Instead the court must re-write the agreement so that it is reasonable. Interestingly, it is the only area of law where the Court has the power to re-write a contract.
In addition to Non-Compete Agreements, an employer who is concerned about the potential loss of proprietary information should also consider asking key employees to sign a Confidentiality Agreement and a Non-Solicitation Agreement. With the increase in technology, the ability to transfer valuable data and assets has never been easier – just a few key strokes away in many instances. As such, we caution our business clients to take precautions to preserve their valuable proprietary information, ideas and assets through the use of reasonable Non-Compete, Non-Solicitation and Confidentiality agreements.