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Will your automotive industry non-compete be upheld?

Hubbard Snitchler & Parzianello

If you own a company that operates in the automotive industry, you may have wondered whether you should make your employees sign non-compete agreements. They have become increasingly popular throughout the business world over the last few years.

The Economic Policy Institute (EPI) found that half of all companies require some of their workers to sign one. Almost a third of businesses require all their employees to sign them. The report suggests that non-competition agreements are harmful to the economy and overused.

There have been various motions to restrict their use in recent years. However, they are still legal in Michigan under the Antitrust Reform Act. If you wish to use one, you need to ensure it is “reasonable” in terms of:

  • Duration
  • Geographical area
  • The type of employment or line of business

If the judge decides a non-compete is unreasonable, they may choose to apply what they consider a reasonable version instead. So the key is to define the boundaries correctly in the first place, to protect what you need to protect rather than trying to protect everything.

It may help to determine which employees need to sign a non-compete and come up with different agreements for different employees or roles. Your receptionist is unlikely to have access to the technical secrets that your engineers do. An engineer probably does not have the sales contacts your head of regional sales does.

Determining what is reasonable is open to interpretation. If you have a Detroit automotive employee who has broken a non-compete agreement, you will need legal help. You need to convince the judge that the conditions of your non-compete were reasonable.

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