Changes Coming to Non-Compete Laws in Michigan?

Here’s a scenario I see routinely:

Person leaves a business to go start up their own competing business.

I ask: did you sign any restrictive agreements with the company that affect what you can do when you leave?

The answer I hear it all the time:

“Yeah, I signed a non-compete but I know they don’t hold water.“

Well…that’s not exactly true.

In my neck of the woods disputes over restrictive covenants is one of the most litigated issues in our Specialized Business Court docket. You can see for yourself. Check out the opinions.

Sure, such contracts must be reasonable – which can depends upon the facts of each case – but these contracts should be taken seriously.

There certainly has been a push to loosen up such restrictions.

Case in point, on January 30, 2025 House Bill 4040 was introduced which would put serious restrictions on a company’s ability to obtain a non-competition agreement from its employees.

The Bill wouldn’t prohibit confidentiality agreements or narrowly defined “non-solicitation” agreements, but would impose serious penalties on a business for requiring an employee to sign a non-compete.

What should business owners know:

1. Under the current law, reasonable non-competition agreements are generally enforceable to protect a legitimate business interest. Talk to a lawyer on how this applies to your business.
2. The laws are always changing – court cases and statutes. For a moment the Federal Trade Commission banned non-competes nationwide until it was held unenforceable in court. State laws vary. Many such bills have been introduced in the Michigan legislature to restrict non-competes – all of them die in committee.
3. Bottom line: this is not an area of the law you want to leave to guesswork. Engage a corporate attorney to assist you in navigating these contracts.

Play long term-games with long-term people. – Naval Ravikant.

Your legal advisor should be someone you trust for the long-term who is aligned with your Company’s core vision/mission and values. If you’re interested in exploring engaging a fractional general counsel for your business or family office give me a call (616) 952-8802.