“White House Issues Call to Action on Non-Compete Agreements” by Katherine F. Cser

Indeed, many workers only learn that they are bound by a non-compete agreement after they leave their employer. According to the White House study, non-competes affect almost one in five U.S. workers, across all industries. The prevalence of these agreements raises concern that the restraint on trade that non-competes impose is not justified and hurts the economy.

As a result of its study, the White House called on state legislatures and policymakers to: (1) limit the use of non-compete agreements to situations where they are truly necessary and ban non-compete clauses for certain categories of workers, such as those earning less than a certain wage threshold, those in occupations that promote health and safety, those less likely to possess and use trade secrets, and those who have been terminated without cause; (2) improve transparency and fairness of non-competes by providing consideration above and beyond continued employment; and (3) encourage employers to write enforceable non-compete agreements and promote the use of the “red pencil doctrine,” which voids contracts in their entirety when a provision is deemed unenforceable.

Last year, a Michigan House Bill proposed to void non-compete restrictions between an employer and employee, with certain exceptions, such as the sale of a business.  This outright ban on non-compete agreements is unlikely to pass. It is unclear whether the Michigan legislature will heed the White House’s call and propose a bill in line with the White House recommendations.

Employers should carefully consider the scope of their non-compete agreements and speak to an employment attorney about drafting agreements in light of increasing review of these restrictions.