IS MY NONCOMPETE ENFORCEABLE?
You received a cease and desist letter. The letter is from a high-powered law firm. Your former employer is attacking your integrity and your livelihood. You’re facing a lawsuit, uncertainty, and legal fees. Perhaps your former employer is accusing you of stealing trade secrets, unfair trade practices, or tortious interference. The letter is meant to intimidate, cower, and frighten you. It has succeeded in that regard.
But are non-competes really enforceable in Michigan? Does your employer have a leg to stand on?
The answer is complicated.
The Rule of Reason
In Michigan, courts apply the “rule of reason” to four different aspects of an employee non-compete to determine its enforceability. Those factors are:
the employer’s reasonable competitive business interests;
the duration of the limitation on competition
the geographic area in which the employee is restricted from competing; and
the type of employment or line of business in which the employee is restricted from competing
But what are reasonable competitive business interests? Is it reasonable to protect customer lists when those customers are advertised on the company’s website? Probably not.
What is a reasonable amount of time? Do courts expect employees to just not work for years if they are only trained in one profession? Probably not.
What is a reasonable geographic scope? Does the same analysis apply in Detroit that would apply in Traverse City? Probably not.
The reality is that what is reasonable can vary significantly from case to case and person to person. Factors such as education, population density, economic opportunities, mobility, disabilities, educational opportunities, and vocational training must be considered. Most importantly, but most often ignored in the analysis, is that employee non-compete agreements must protect legitimate business interests. Many non-competes, however, protect no legitimate interest. Instead, employers intend the non-compete as a barricade against the ordinary competition. This might make the agreement unenforceable and criminal because it is an anti-competitive restriction on trade meant to suppress employee wages and restrict employee mobility.
Leverage
Whether a non-compete is enforceable in Michigan might not depend on the terms of the non-compete at all. Instead, it often boils down to one word: leverage. Maybe you were misclassified as an independent contractor when you were an employee? Perhaps your employer was inaccurately tracking hours and failing to pay overtime? Or maybe you were terminated after you reported a violation of law or expressed health and safety concerns? In reality, many employers have skeletons in their closets that they would prefer to keep hidden from a very public and drawn-out lawsuit. The intent should never be to extort or harass your former employer. But employees who face serious claims against them should be willing to assert their own counterclaims, with legal counsel, to obtain damages and attorney fees. The ability to find leverage is not always possible. But with the counsel and analysis of a skilled employment attorney, it often occurs. The employer will feel like it kicked a beehive when it does.
Conclusion
If you run and take cover as soon as you receive a cease and desist letter, you have done exactly what your former employer wants you to do, and you might be missing out on tremendous economic opportunities. But if you ignore the letter and continue with your course of conduct, you can expect to find yourself in a lawsuit. Those are two bad choices.
When you receive a cease and desist letter, you need to have an attorney promptly and forcefully respond on your behalf. This will let your former employer know that the dispute will cost them as much, or possibly even more than it will cost you.
Furthermore, let your attorney explore the possibility of counterclaims. Up the ante on your former employer. Your former employer might think it has you right where it wants you. But it may have just walked into a trap.
