There is a substantial amount of paperwork involved in the on-boarding process for a new employee. One of the documents that a new employee may be asked to sign is a

The Nature of Non-Compete Agreements

In Michigan, a non-compete agreement is only enforceable in a court of law if it is reasonable. This requirement has been upheld in numerous court cases including Innovation Ventures LLC v. Liquid Manufacturing LLC, in which the Michigan Supreme Court held that a noncompete provision must be evaluated for reasonableness.

To determine whether a statement is reasonable, there are several elements that a court will consider:

• The type of business, industry, or position involved. This category involves the type of activity that the worker is prohibited from doing. A reasonable noncompete agreement might limit a former worker from working in a small niche within a company. A noncompete agreement that prohibits a worker from functioning in an industry in any degree, however, would likely be found unreasonable.
• The duration of the non-compete term the worker must follow. An agreement will be found unreasonable if it prohibits a worker from being employed for too long a period of time. For example, a noncompete agreement that restrict a worker from being employed for 10 years would likely be found unreasonable, but a one-year restriction is often found to be reasonable.
• The geographic location mentioned in the agreement. Noncompete agreements are often found to be unreasonable if they prohibit a worker from being employed in too large an area. While a noncompete agreement that prohibits a person from working in the United States would likely be found unreasonable, an agreement that prohibited a worker from being employed in a several mile radius would likely be found reasonable.
• The business interest that the agreement seeks to protect. This factor refers to a specific advantage that the worker might be able to use in competition against a former employer. Noncompete agreements must specify about what exact unfair advantage is involved. For example, an unfair advantage might include awareness of confidential information, knowledge of a customer base, and unique training.

It should be noted that this reasonableness standard only applies to employee noncompete agreements. Commercial non compete agreements follow a different standard. In either case, to make sure that a non-compete agreement is reasonable, it is often a wise idea to speak with a knowledgeable lawyer.

Speak with an Experienced Bankruptcy Law Attorney

If you are a worker who is attempting to challenging a non-compete agreement or a business founder seeking to craft an enforceable non-compete, an experienced corporate law attorney can help. Contact the Resnick Law, PC today to schedule an initial free case evaluation.

(image courtesy of Marten Bjork)