Chances are you will be faced with the decision of having to sign a non-compete agreement at some point in your career.
The purpose of a non-compete agreement is to limit an employee’s future employment after he or she has left the employer so as to protect the employer’s competitive business interests. Michigan law requires non-compete agreements to be reasonable in terms of their duration, geographical area, and the type of employment or line of business that is being limited.
Before signing, it is important to be aware of certain red flags for non-competes:
- The scope is too broad. Employers often have employment prohibitions that are much broader than your actual job description. The types of employment and the lines of business that are being limited in the non-compete should match what you are being hired to do for the employer. For example, if a salesperson in the software industry is presented with a noncompete agreement that forbids him or her from working in “technical sales” in the future, it is reasonable for that person to request that the limit be confined to software sales only.
- Geographic limits are not specified. A non-compete agreement should define the geographical location or radius within which any future employment restrictions apply. Depending on the industry, this will vary. For a retail position, a reasonable limit might be a radius of 10 miles while, in sales, it could potentially cover an entire region.
- The duration is unreasonable. Your non-compete agreement must include a time limit.
There is no rule of thumb as to what is reasonable for different positions. Generally speaking, more executive positions may warrant longer non-compete periods. A question you can ask yourself is whether the proposed time limit is realistic for your situation in the event you had to find a new job.
- The agreement stifles opportunities for career growth. When considering a non-compete agreement, it is important to think about your career goals. Terms that you find overly restrictive in your ability to pursue these goals should be avoided.
- There is a mandatory arbitration clause. Many non-compete agreements specify that arbitration is required if a dispute should arise between the parties. The mandatory arbitration clause is generally to the employer’s benefit because it eliminates the employee’s ability to take the dispute to court to have the court determine whether the non-compete agreement is “reasonable” in all aspects required by law.
If you see any of these red flags, ask for revisions, if possible. If you are concerned about the legality of the non-compete agreement you are being asked to sign or have already signed, consulting with an attorney who specializes in employment law is strongly advised.
Strobl Sharp is a team of experienced and trusted lawyers that can advise on all legal matters relating to employment and non-compete agreements. For more information, visit Strobl Sharp online at StroblLaw.com or on LinkedIn.