The Michigan Chamber testified in the State House last week in opposition to legislation to restrict employers’ use of noncompete agreements. The Chamber’s testimony focused on why it isn’t wise to take a cookie-cutter approach to this complex issue.
Michigan employers have long used non-compete and non-disclosure agreements to protect intellectual property, including patents, trademarks, copyrights, confidential information, trade secrets and technology. Michigan law currently allows employers to obtain an agreement which protects its “reasonable competitive business interests” and which “expressly prohibits an employee from engaging in employment or a line of business after termination of employment if the agreement or covenant is reasonable as to its duration, geographical area, and the type of employment or line of business.”
Although a handful of states, including California and North Dakota, prohibit non-compete agreements, nearly every other state recognizes some form of non-compete agreement or other restrictive covenant.
The Michigan Chamber does not support the one-size-fits-all approach House Bill 4874 takes on non-competes related to lower-wage employees because it does not take into account any other factor than income, such as access to proprietary information, sensitive processes, technologies, trade secrets, competitive information or the like. Internal dissemination of proprietary income, access to specialized technology or confidential information is not limited by income.
The Michigan Chamber will continue to support a process whereby non-compete agreements are dealt with on a case-by-case basis and enforced only if a noncompete is found to be reasonably tailored as to duration, geography and scope of activity restricted and in place to protect the legitimate business interest of the party seeking its enforcement.
The bill was not voted on by the committee and it’s unclear if or when it will be. We are closely monitoring the legislation and making our opinion known. Please contact Wendy Block with any questions at wblock@michamber.com.