I hope you all had a great Labor Day Weekend. I spent the long holiday weekend with my family in Michigan’s Upper Peninsula.
On September 4, 2019, Senate Bill 0483 was introduced in the Michigan Senate.
If passed it would limit the enforceability of a non-competition agreement signed between an employer and an employee.
In my opinion – in some pretty significant ways.
I have spent several articles discussing the legal consequences/enforceability issues of non-competes.
It appears the Legislature is wrestling with the question posed by Nick Manes previously with MIBiz in an article a few years back: “Are noncompetes a barrier to growth?
You can check out the text of the bill here
The Bill was referred to the committee on Government Operations.
The Bill has a few key components to it:
1. Require Employers to follow a Specific Procedure prior to executing a non-compete.
The Bill would only permit Employers to execute a non-competition agreement if the Employer followed a procedure intended to notify the Employee of the requirement of signing a non-compete as a condition of employment.
(A) INFORMED THE PROSPECTIVE EMPLOYEE IN WRITING OF THE REQUIREMENT AT OR BEFORE THE TIME OF THE INITIAL OFFER OF EMPLOYMENT.
Questions? Comments?
e-mail: Jeshua@dwlawpc.com
Twitter: @JeshuaTLauka
(A) Informed the prospective employee in writing of the requirement or before the time of the initial offer of employment;
(B) Disclose the Terms of the Non-Compete in writing; and
(C) Post the Text of the Law at the Worksite in a CONSPICUOUS LOCATION
2. Non-Compete unenforceable if the Employee is a “low wage” worker.
Defined generally as $15.00/hr or $31,000 annually.
3. Voids Certain Provisions in a Non-Compete – shifts the burden to Employer.
The Bill also has some teeth in it for Employees, including:
- Prohibits an Employer from including a clause that states a different state’s laws control the Agreement – this would be an obvious attempt to circumvent the prohibition of non-compete against “low wage” workers;
- Gives the Attorney General power to prosecute a violation of the Act;
- Automatically places the Burden on the Employer to prove that the Non-Compete was reasonable, as to “scope, duration, time limit.”
- Moreover, if a Court limits the non-compete in any respect, the employee is entitled to recover attorney fees.
Wow. This bill has a lot of bite to it – particularly the fee shifting mechanism if a court limits a non-compete in any respect. My first thoughts – if this Bill does come out of Committee, I can’t imagine it will look the same as its current version.
I understand the legislature’s interest in protecting “low wage workers” from unreasonable restrictions. Check out my prior post on the subject of Jimmy John’s non-competes.
However, in my opinion the restrictions as written places an enormous burden on the employer to narrowly tailor the non-compete, to a judge’s definition of “reasonableness”. Otherwise, like I said, the fee shifting provision is a huge penalty.
Questions? Comments?
e-mail: Jeshua@dwlawpc.com
Twitter: @JeshuaTLauka
Purpose Driven General Counsel 
This seems like a pretty good bill to me. It puts more responsibility on the employer (who would generally know much better than the employee) to limit the scope and term of the non-compete agreement to things that would likely be materially harmful to their company if a former employee went to work for “the competition.”
This is a much more fair requirement than the general non-compete agreements which are so broad as to prevent a former employee from working for another company in the same industry, even if their new job responsibilities would be different enough from their previous role as to not really be likely to be harmful to the former employer, or significantly beneficial to the new employer (say from the employee having knowledge of trade secrets or intellectual property from their previous employer that they could put to use in a very similar role at the new company, but which would be hard to prove by the former employer).
And the fact that it seems to be aimed at primarily protecting low wage workers makes it even better. Low wage workers aren’t likely to be able to significantly impact their former employers or help their new employers, even if they are in the same role, simply because they aren’t likely to have the kind of knowledge or expertise that would enable them to do so. That’s one of the main reasons why they are low wage workers…
So I like the bill. And by the way, I am subject to a non-compete agreement myself, but am not a low wage worker according to the definition of given in your post above.