Archive for the ‘Noncompete’ Category

Is Your Non-Compete Valid?

Monday, December 23rd, 2013

Matt: Hi, it’s Matt Plessner, and welcome back to Non-Compete Law Radio. How do you know your non-compete is, for all intents and purposes, valid? To answer this question and of course, much more, we’re joined again today with attorney at law Mark Clark from the Traverse Legal office of Traverse City, MI. Mark, thanks for joining us.

Mark: Thank you, Matt. It’s my pleasure to be here.

Matt: Well, it’s a pleasure to have you. Now, let’s start out simply: what are some of the most basic ways to know if your non-compete is, indeed, valid, Mark?

Mark: Well, first of all, we’ll probably need to distinguish the question of “is your non-compete valid?”  whit the corollary question of “is your non-compete reasonable?”  most courts around the country will assess a non-compete for the issue of reasonableness in both a geographic scope relative to geographic limitations, and for duration, in terms of limitations. The question that is sometimes missed or does not get answered, in the first instance is, is your non-compete valid? Matt: Ok. Well, so we’re talking about geographic locations, and of course, that’s a big factor when it comes to reasonability, as you’re talking about right there. I guess, with geographic location, how far away are, I guess, two businesses or anything else involving a non-compete, allowed to be?

Mark: Well, in terms of the scope of reasonability that will really depend, Matt, on the particular facts and circumstances in each case.  Ordinarily a court will not enforce or will not find a non-compete reasonable if it goes beyond the scope of the former employer’s business. In other words, if it is over-broad and limits the employee from engaging in the activity beyond the scope of the market of his former employer. Now, the question of whether a non-compete is valid VS whether a non-compete is reasonable is a completely separate question. Your non-compete may be invalid for a number of different reasons.

Matt: Ok, and what are some of those reasons (just an overview),Mark? Mark: Sure. You may have an invalid non-compete if the non-compete restrictions appear in a general employment contract agreement, and the employer breaches the contract first. So, in other words, you may have a basis if your employer breaches the entire agreement for invalidating your non-compete restrictions that are within that agreement.

Matt: And, just out of curiosity, Mark does the size, or even how successful the company or business is, does that come into play with reasonability?

Mark: In terms of reasonability, generally not. The courts look at it simply from the particular facts and circumstances surrounding both the market, the job descriptions, what the employee will be doing in a subsequent job relative to both geographic scope, and job duties and responsibilities. Now, in terms of whether or not a non-compete is valid, there are also other reasons why your non-compete, as opposed to being reasonable or unreasonable, may not be valid in the first instance. In most states, the court needs to make a threshold finding an employer’s legitimate business interest. If an employer cannot identify a legitimate business interest, in enforcing that non-compete with respect to that particular employee, given that employees job duties and responsibilities, that we may never get to the issue of reasonableness. Now, some of the legitimate business interests that courts have recognized may include protection of specific trade secrets and some of the relationships that the employer has built with it’s customers. Those may be found to be legitimate business interests. Nevertheless, the employer does not identify those legitimate business interests in the agreement, or cannot otherwise establish that it has a legitimate business interest in protecting these types of interests in relationship to the particular employee and his or her job responsibilities, then your non-compete agreement may simply be invalid

Matt:  Well, this is all really good to know Mark. And of course we’ve talked about this before, always have an experienced non-compete attorney validity and make sure that it’s reasonable, correct?

Mark: Absolutely, because whether or not a non-compete is valid or invalid which is really a threshold question, takes a detailed analysis of all the facts and circumstances behind the non-compete. Additionally, if we get to the question of whether it’s reasonable, that question also undertakes a detailed analysis of the specific facts and circumstances behind that employer’s business, the employees specific job duties, and the particular market being served by that employer and employee, specifically as it relates the employees subsequent employment.  

Matt: Well Mark, as always, I want to thank you for joining with us today and talking with us about non-competes, and of course we look forward to future interviews with you.

Mark: Thanks Matt, it’s always a pleasure to be with you.

Matt: And it’s a pleasure to have you, and once again, this is Matt Plessner for Non-compete Law Radio.




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Update for Michigan Non-Compete Law

Monday, October 14th, 2013
Matt:  Hi, and welcome back to Internet Law Radio. I’m Matt Plessner, and it’s time now for some updates on Michigan Non-Compete Law. And to help us out with this, we welcome back Mark Clark from the Traverse Legal office of Traverse City, MI. Mark, how are you?
Mark: I’m doing well, Matt. How are you today?
Matt: Doing very well. So Mark, what are some of the latest developments in Michigan Non-Compete Law?
Mark: Well Matt, Michigan currently has a senate bill pending, senate bill 786, which would provide a fairly significant change in Non-Compete Law. The only other state to have a similar law is New Hampshire. In the area of Non-Competes, employees who are provided a Non-Compete agreement are often provided a Non-Compete agreement after they commence employment, and are hesitant to sign them for the obvious reasons that they weren’t aware of what the restrictions would be prior to employment. This is an often litigated issue in whether or not a Non-Compete agreement is valid or invalid for lack of consideration. Most courts in Michigan will take the position that continuing employment is adequate consideration considering that an employee execute a Non-Compete agreement after starting employment. The new Michigan senate bill, if it passed into law, would prohibit an employer from requiring and employee to execute a Non-Compete if it was beyond the offer of employment. In other words, if an employer does not provide an employee the Non-Compete with the offer of employment, the employer subsequently cannot insist that the employee execute a Non-Compete. As I’ve indicated, there’s one other state that has actually adopted such law. And there’s some debate as to whether or not its beneficial for employees or not, but at least it would provide a bright-line test as to the validity of a Non-Compete after employment starts. One of the criticisms of the bill is that it would make it difficult or provide an incentive to promote employees to positions that would require a Non-Compete after the commencement of employment. My suggestion would be that that is an obvious issue that the legislature would likely address in any version of the law if it were to come into law, but it’s an interesting bill, and we’ll keep our eyes on it.   Continue reading Update for Michigan Non-Compete Law »
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Enhance the value of your business with non-compete agreements

Monday, July 29th, 2013

Often we think that the value of a business is in its hard assets or intellectual property, and that in order to maintain the value in your business for purposes of either selling the business, or otherwise valuing the business in the marketplace, that you require agreements to protect those assets. One thing that employers often forget is that the value of the business is also in its employees. The best way to maintain value in a business for purposes of continuing or selling is to employ legitimate non-compete agreements to restrict movement of key employees to other employers. If you intend to sell your business or to take on investment or partners, those individuals or investors will want to be assured that key employees cannot simply walk away to the nearest competitors. Valid and reasonable non-competes can assist in preserving the value in your company by preserving its most valuable assets, which are its key employees. The lawyers at Traverse Legal can assist you in developing a non-compete that is reasonable and will assure you the best protections of having the non-compete invalidated by an arbitrator or judge in the event of a later dispute. Retaining key employees with the benefit of non-compete agreements will assist in preserving the value of your business.

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All or Nothing: Obtaining a Preliminary Injunction

Wednesday, July 24th, 2013

This post is useful for both employers and employees, and discusses what the legal standards are for obtaining a preliminary injunction in a non-compete case in Michigan, and generally throughout the remaining jurisdictions in the United States. A preliminary injunction is an injunction that the employer petitions the court for at the initial stages of the case to prevent the employee from violating the non-compete agreement. It usually requests that the employee cease working for a competitor during the pendency of the case.

A court must consider four factors in determining whether to issue a preliminary injunction: 1. harm to the public interest if the injunction issues; 2. whether the harm to the applicant for the preliminary injunction in the absence of the relief outweighs the harm to the opposing party if the relief is granted; 3. the likelihood that the applicant for the preliminary injunction will prevail on the merits; 4. a demonstration that the applicant will suffer from irreparable injury if the relief is not granted. These are general enough standards but oftentimes it boils down to the courts assessment of the relative strength of the employers non-compete under the specific circumstances of the case and the harm that the employer may suffer in the absence of the injunction. Both employers and employees must be cognizant of the standards in assessing the merits of their claims and defenses in the event of litigation over a non-compete agreement where a preliminary injunction is issued.

Oftentimes the case is won or lost on the issuance of the preliminary injunction on the outset of the case. Many times the employer who fails to obtain a preliminary injunction loses its incentive to litigate the case to its conclusion. In the event that the court issues the preliminary injunction an employee often loses his incentive to continue to defend the claims.

In assessing either your claim for a preliminary injunction or your defenses to a preliminary injunction it is important to consult with an experienced non-compete attorney. The experienced non-compete attorneys at Traverse Legal can provide you that assistance.

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Legislation Pending Regarding Non-Compete Agreements

Friday, July 19th, 2013

The governor of Connecticut recently vetoed an amendment to the Connecticut Non-Compete law that would have provided employees with a seven day review period prior to signing a non-compete in the event of a sale or merger of a company. Michigan has a proposed bill that would require employers to provide a non-compete prior to the commencement of employment. Why has there been an increase in proposed bills that would limit an employer’s ability to obtain a non-compete?

It seems that in this time, where unemployment is high and mobility in jobs is favored, the public sentiment, as well as court sentiment, is moving toward more employee freedom concerning job options. One of the risks in providing an employee a non-compete outside the bounds of your state’s restrictions can be the invalidation of the non-compete agreement. Finding a non-compete agreement on the internet, or simply borrowing one from another company will often not satisfy the legal requirements for a valid non-compete agreement.

When you need to draft a non-compete agreement that will withstand the legal requirements as well as judicial scrutiny, it is important to have a qualified non-compete lawyer draft your agreement. The attorneys at Traverse Legal are experienced non-compete lawyers, and can provide you with a valid non-compete that meets your state’s requirements. Contact an experienced non-compete attorney at Traverse Legal to discuss your proposed non-compete agreement.

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Employer Drafting Considerations in your Non-Compete

Friday, July 12th, 2013

Oftentimes employers are tempted to utilize form non-competes that they find on the internet. However, the remedies available in the event of a dispute over a non-compete vary from state to state and necessarily impact the drafting considerations for a non-compete. Employers should carefully consider the available remedies in their jurisdiction in employing a non-compete agreement in your business.

For example, in some states courts are allowed to “blue pencil” a non-compete agreement. The ability to blue pencil means that the courts can simply strike provisions that they believe are invalid leaving the remaining portions of the non-compete in place. This is very important as the striking or eliminating of a non-compete provision but leaving others in place can actually work against the employer when it comes time for enforcement of your non-compete.

Courts in other jurisdictions have the opportunity to “red pencil” a non-compete that they find to be partially invalid. The ability to red pencil means that the court can simply strike the entire non-compete if any small portion of the non-compete is invalid. This has an obvious deleterious effect on the employer’s ability to enforce a non-compete agreement.

Finally, many states afford courts the opportunity to reform the agreement so that it is reasonable under the circumstances. This means that the courts will not enforce the agreement as written, but as the court views the reasonableness of the provisions presuming that the agreement is found to be unreasonable in terms of scope and duration of the non-compete restrictions.

Employers will want to carefully weigh the remedies as part of their consideration in drafting the non-compete, and to make certain that to the extent possible the scope and duration of the non-compete restrictions are reasonable up front. The risks concerning a finding that your non-compete provisions are invalid in part depend on the remedies available in your jurisdiction of enforcement.

The attorneys at Traverse Legal can assist you in tailoring a non-compete to minimize those risks that may be found either invalid or unreasonable and to advise you of those risks in the drafting of your non-compete agreement.

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How to Circumvent or Get Around Your Non-Compete Agreement

Tuesday, May 8th, 2012

If you are the employee and you have signed a non-compete agreement, the first question that you always have is how to get out of this non-compete agreement. We get calls all the time from employees who either signed a non-compete going into employment or were asked to sign a non-compete contract and confidentiality agreement during their employment. They sign those thinking, of course, that everything will go great for life and all of a sudden there is a downsizing or you get fired, or there’s a change in management, and you wonder what your options are going out the door.

Non-compete agreements typically are very broadly drafted, and so if you happen to be a person in the technology field and you’ve signed a non-compete agreement, many of those non-compete agreements are drafted so broadly that you couldn’t go work as a local web developer doing your own internal web design, for no customers. These things have to be limited to a legitimate business purpose. You, as the employee, typically have a much smaller budget for your lawyers to work with than the employer has. Negotiation is typically the approach that we use when we have an employee who wants to know, “How do I get out of this non-compete agreement. I’m either still employed or recently laid off. I’m looking at this other employment opportunity, and I don’t want to get their new employer in trouble. I don’t want to violate my non-compete.”

Continue reading How to Circumvent or Get Around Your Non-Compete Agreement »

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A Covenant Not To Compete in Michigan Can Be Enforceable

Tuesday, May 8th, 2012

Yes, non-compete clauses and non-compete agreements can be enforceable in court. Many, many years ago they were held to be unenforceable. The Michigan legislature stepped in and passed a statute as part of its anti-trust reform and changed the law. Michigan now is under a statute which says that non-compete agreements can be enforceable to the extent that they are reasonable, and that if the non-compete clauses in the agreement are too broad or are unreasonable, that a court may reform the contract to limit the non-compete and make it reasonable. Continue reading A Covenant Not To Compete in Michigan Can Be Enforceable »

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What Is Non-Compete Law?

Wednesday, December 28th, 2011

A non-compete and trade secret agreement is a contract signed by an employee where he or she agrees that they will not engage in certain employment within a certain geographic area for a certain period of time after they quit or are fired. Likewise, a non-solicitation agreements preclude a terminated employee from contacting the employer’s customers or remaining employees after leaving employment.

If you would like to protect your trade secret(s), implement a non-compete agreement or have questions regarding the enforceability of your non-compete agreement, contact one of our internet lawyers who specialize in non-compete law.

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