You are hiring key employees who drive revenue and growth. Losing them to a competitor could put your business at risk.
Noncompete agreements can help protect your clients, secret business information and daily operations. In Michigan, these agreements are mostly banned under the Michigan Mobility and Opportunity Act, but there are some exceptions. Understanding what makes a noncompete valid helps you safeguard your most important assets.
Why noncompete agreements matter for your business
Noncompetes create boundaries around sensitive client relationships and secret business information. If you meet the rules, they help protect the time and money you put into developing important skills and client relationships. They also reduce the risk that a competitor will gain an unfair advantage.
Knowing how Michigan courts look at noncompetes shows you how they can protect your business.
What makes a Michigan noncompete enforceable
Not all noncompetes hold up in court. Michigan law now strictly limits when you can use noncompetes. Before thinking about whether a noncompete is fair, you must first meet these basic requirements:
- You can only require noncompetes from employees earning above $112,500 annually
- You must provide the agreement before you extend the job offer or before the first day of employment
- You cannot enforce noncompetes against workers under age 18 or students in internships, apprenticeships or similar programs
- You must provide required disclosures under Michigan law when presenting a noncompete
If your employee meets the threshold, state courts then consider four main elements when deciding if a noncompete is valid:
- Reasonable duration, usually one to two years, so it is not overly restrictive
- Area restriction that reflects your business market and operations
- Things you can protect, such as trade secrets, client lists or key relationships
- Clear scope of restricted work or competitive activities so expectations are transparent
You must meet both the legal rules and the fairness test for your noncompete to be valid.
Protecting your business as you scale your business
You can review noncompetes by reviewing current agreements and confirming they cover the right risks. Clear, specific language reduces confusion and sets realistic expectations.
Legal guidance can make sure your contracts follow Michigan law and match how your business runs every day. A clear noncompete helps protect your revenue, keep your clients and secure your business for the future.