The Importance of a Well-Drafted Non-Compete Agreement, Part 2
On behalf of Fausone Bohn, LLP on Thursday, May 21, 2015.
Breeda O’Leary-Brassfield, esq.
A recent Michigan Court of Appeals decision highlights our recent articles on the importance of a well-drafted non-compete agreement for your business. Generally, these agreements not to compete are enforceable when they protect the employer’s reasonable competitive business interests and are reasonable in duration, geographical scope, and line of business.
However, in September 2014, the Court of Appeals struck down a non-compete clause that prohibited the former employee from working for any company that “makes or sells any products competitive with a product offered by the company.” While this may sound like typical language in a non-compete clause, the Michigan Court of Appeals determined it to be overly broad and unenforceable.
In that case (Huron Technology Corp v Albert Sparling), Defendant was a former employee of Plaintiff who resigned to go work for another company. Both companies manufactured and sold “material handling equipment” (i.e. conveyor equipment). Plaintiff argued that Defendant violated his two-year non-compete clause by working for a competitor within that time frame.
The court held that the non-compete was unenforceable because it prohibited Defendant from working for any company that offers even a single product that is “competitive” with a product offered by Plaintiff. This prohibited Defendant from working for any company that is even in remote competition with Plaintiff, and was therefore unreasonably restrictive.
This case demonstrates how imperative it is to carefully draft contract language in non-compete agreements. The language, in this case, is similar to what is commonly used by businesses who do not seek the advice of experienced legal counsel. Seeking the advice of experienced counsel will help ensure that the courts will enforce your non-compete agreement.