To keep a business thriving, owners must ensure that they keep themselves at a competitive advantage in their business line. This includes having their employees undergo the necessary training to ensure the quality of products and services. But sometimes, employees part ways with their employers to look for new opportunities. Will this affect one’s business interests?
Protecting business interests
Under Michigan antitrust laws, employers can enter noncompete agreements to protect their business interests. In the contract, the employer expressly prohibits their employees from working for competitors or establishing a similar business for a certain period after their employer-employee relationship ends. However, these agreements are only enforceable if they are reasonable.
What counts as reasonable?
The law protects both an employer’s business interest and an employee’s right to work. To ensure the balance between these rights, Michigan considers certain factors in determining whether a noncompete agreement is reasonable. These factors include:
- The duration of the prohibition
- The geographic scope of the prohibition
- The type of employment or business line
- The business interests to be protected
If the agreement prohibits a past employee from working or establishing a trade in the same business line for too long or too wide of an area, the court may find it unreasonable. Usually, a one-year limit and several miles radius within the employer’s business location is enough to reasonably protect the employer’s right.
What if some agreement terms are unreasonable?
If the court finds portions of the agreement unreasonable, it does not automatically void the document. The court may limit the unreasonable parts and enforce the rest of the agreement terms.
It is understandable for employers to worry about the unfair advantage their competitors may gain if a previous employee, who was specially trained and is familiar with their trade secrets, works for them or establishes a similar business. Fortunately, a noncompete agreement can help ease their worries as long as it is reasonable.