Imagine that you’ve just started a new position with a new company. Just as you are getting to know your new colleagues and settling into your new role, you’re served with a lawsuit from your former employer claiming that you breached a non-competition, non-solicitation, or confidentiality agreement.
According to a recent Wall Street Journal article, litigation over non-competition agreements has increased 60% over the past decade, a meteoric rise. Employers claim that such provisions – and the lawsuits they can trigger – are “needed to prevent insiders from taking trade secrets, business relationships or customer data to competing firms when they leave.”
This sharp jump in litigation is alarming when one considers the substantial expense of defending such lawsuits and the fact that non-competition agreements are not just limited to executive level employees, but also include sales representatives, engineers and people involved in research and innovation.
In Michigan, the governing statute allows employers to:
[O]btain from an employee an agreement or covenant which protects an employer’s reasonable competitive business interests and 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. To the extent any such agreement or covenant is found to be unreasonable in any respect, a court may limit the agreement to render it reasonable in light of the circumstances in which it was made and specifically enforce the agreement as limited.
These agreements and covenants are often signed at the time the employee begins employment, but may also be included as part of the employee’s annual performance evaluation. In Michigan, the primary challenge to non-competition agreements focuses on the breadth of the restrictions contained in the agreement, which most of the time centers on the time restriction or the type of competition in which the employee may not engage – challenges that are often very fact specific and rise and fall on the business practices of the industry in question.
Across the nation, states impose non-competition laws that vary from that found in Michigan with some states being more employee-friendly and some states having even stricter guidelines than Michigan. Which law governs an employee’s non-competition agreement will generally depend on where the employer’s headquarters is located.
If you’ve been named in a lawsuit claiming breach of a non-competition or similar agreement, or an employer with a former employee whose new employment jeopardizes your business, you need to understand the laws that apply to your situation. We have in-depth knowledge of the varying state statutes concerning non-competition agreements, and have litigated countless non-competition, non-solicitation, and confidentiality agreement claims, in Michigan and elsewhere. If you need help, the attorneys at Sommers Schwartz are ready to step in.