Make a Michigan Non-Compete Agreement

Applicable State Laws -  MCL § 445.774a  

MCL 445 is known as the Michigan Antitrust Reform Act. Unlike many states that either disfavor non-compete agreements altogether or favor the employee, Michigan law requires a non-compete to be fair to both parties. If the document is found to be unfair in the restrictions or expectations of either party, the state reserves the right to step in and limit the stipulations of the contract.

Non-compete agreements must be honest and just purpose as well as protect legitimate business interests. They must have a reasonable time period of no greater than one year, a reasonable geographic area, and line of business. They also must not be offensive to public policy.

How to Write a Michigan Non-Compete Agreement

To write a Michigan non-compete agreement, review the Michigan Antitrust Reform Act. The following clauses should be included in the non-compete, but keep in mind that Michigan law requires that the agreement be fair and balanced and that the time period cannot be greater than one year.

• Purpose. This clause explains that the purpose of the non-compete is to protect the confidential information of the business. It goes on to identify the parties and their roles and includes the effective date of the contract. It may also state that the term "proprietary information" will be used interchangeably with "confidential information."
• Non-compete. This clause explains the restrictions on time, geographic areas, business practices, clients and customers, general and specific competitors, general and specific business practices, and non-solicitation of employees.
• Time period. In addition to possibly restating the time period restriction, this clause also states when the time period beings, either when the employment relationship begins or when it ends.
• Purchase option. This clause states whether your business will allow the signing party to buy their way out of the contract. If this is allowed, the amount paid is listed in this clause.
• Jurisdiction. The purpose of this clause is to explain that Michigan laws will govern the agreement.
• Confidential information. This clause states that the term "confidential information" as it is used throughout the non-compete agreement means any and all technical and non-technical information provided by your business that includes, and is not limited to, any data or other proprietary information related to products, inventions, plans, methods, processes, developmental or experimental products, intellectual property, software, databases, customer lists, vendor or supplier lists, marketing methods, reports, business plans, financial information, or other matter pertaining to your business or any of your clients, consultants, or licensees that is disclosed to the recipient under the terms of the non-compete agreement.
• Permitted disclosure. This clause explains when confidential information is no longer confidential. This generally occurs when information becomes public through no fault of the signing party, when the information is discovered by the signing party on their own without a breach of another party, is released to the public after the written consent of the business, etc.
• Confidentiality. This clause states that the signing party acknowledges that the information they have access to is confidential and that they agree that they will not directly or indirectly disclose the information to another party without first receiving written consent from your business. The signing party also agrees that they will not use the information for any purpose except to further the business without first obtaining the written consent of your business.
• Consultants and employees bound. This clause states that the agreement binds both consultants and employees to keep the information in the strictest of confidence. It also states that consultants and employees are on a need-to-know basis.
• Return of materials. This clause states that when the non-compete is terminated or when requested by your business, the signing party must return all documents and any tangible materials that represent the confidential information and any existing copies. It also states that your business will notify the signing party of any loss or unauthorized disclosure of confidential information.
• Remedies. This clause explains the legal remedies your business is entitled to pursue under Michigan law if the signing party breaches its obligations. Examples include the recovery of court costs, reasonable attorney fees, the award by a Michigan court of a temporary restraining order or a preliminary injunction against the unauthorized use of information, etc., as well as all other remedies available under Michigan law or as a matter of equity.
• Choice of law. This clause states that the parties of the non-compete agree to choose Michigan laws to govern the agreement.
• Entire agreement. This clause states that the entire agreement may be amended in writing and that the parties must sign the amendment.

The parties must sign and print their names to execute the non-compete agreement. Their signatures must be dated. Finally, the parties should each receive a copy of the finalized agreement for their records.