HOUSE BILL NO. 4040

A bill to amend 1984 PA 274, entitled

"Michigan antitrust reform act,"

by amending section 4a (MCL 445.774a), as added by 1987 PA 243.

the people of the state of michigan enact:

Sec. 4a. (1) An employer may obtain from an employee an agreement or covenant which protects an employer's reasonable competitive business interests and expressly prohibits an employee from engaging in employment or a line of business after termination of employment if the agreement or covenant is reasonable as to its duration, geographical area, and the type of employment or line of business. To the extent any such agreement or covenant is found to be unreasonable in any respect, a court may limit the agreement to render it reasonable in light of the circumstances in which it was made and specifically enforce the agreement as limited.

(2) This section shall apply to covenants and agreements which are entered into after March 29, 1985.

(1) Except as otherwise provided in subsection (2), a business shall not do any of the following:

(a) Enter into or attempt to enter into a noncompete agreement with a worker.

(b) Obtain or attempt to obtain a noncompete agreement from a worker.

(c) Enforce or attempt to enforce a noncompete agreement against a worker or former worker.

(d) Represent that a noncompete agreement applies to a worker or former worker.

(2) Subsection (1) does not apply if both of the following conditions are met:

(a) Either of the following applies to the worker:

(i) The worker is an owner of the business and the worker is selling the business or the worker's full or partial ownership interest in the business.

(ii) The worker is responsible for the sale of all or substantially all of the business's operating assets.

(b) The noncompete agreement meets all of the following conditions:

(i) Protects only the business's reasonable competitive business interests.

(ii) Has a reasonable duration.

(iii) Restricts competition only in the relevant market.

(iv) Restricts competition only to the same type of trade or commerce.

(3) All of the following are void and unenforceable:

(a) A noncompete agreement entered into or obtained in violation of this section.

(b) A noncompete agreement that violates this section.

(c) A term in an agreement that does any of the following:

(i) Purports to waive a requirement of this section.

(ii) Requires a worker to adjudicate an action described in subsection (4) in another state.

(iii) Deprives a worker of the substantive protection of the laws of this state with respect to a claim described in subsection (4).

(iv) Requires a worker to pay the costs, or any portion of the costs, to arbitrate a claim related to the noncompete agreement.

(4) A worker aggrieved by a violation of this section may bring an action to recover damages. A court shall award both of the following to a plaintiff who prevails in an action brought under this subsection:

(a) The actual costs of the action that were necessary to defend against enforcement of the noncompete agreement or to void or limit the agreement, including, but not limited to, reasonable attorney fees.

(b) All income lost as a result of actual or threatened enforcement of the noncompete agreement or the unreasonable terms of the noncompete agreement.

(5) This section does not limit the enforceability of either of the following:

(a) An agreement that prohibits a worker from disclosing confidential information or trade secrets.

(b) An agreement that prohibits a worker from soliciting work from a business if all of the following conditions are met:

(i) The worker provides work for the business.

(ii) The worker receives annual remuneration from the business at a rate that is more than 200% of the last published federal poverty line for a family of 3 individuals.

(iii) The agreement expires 1 year or less after the last date that the worker provides work for the business.

(6) This section, as amended by the amendatory act that added this sentence, applies to a noncompete agreement that is entered into before, on, or after the effective date of that amendatory act.

(7) As used in this section:

(a) "Business" means a corporation, business trust, partnership, association, or any other legal entity.

(b) "Federal poverty line" means the poverty line as revised by the Secretary of the United States Department of Health and Human Services under 42 USC 9902.

(c) "Noncompete agreement" means an agreement between a business and a worker that prohibits the worker from, penalizes the worker for, or functions to prevent the worker from doing any of the following after the worker's work with the business ends:

(i) Seeking or accepting work with a different business.

(ii) Operating a business.

(d) "Worker" means an employee, independent contractor, extern, intern, volunteer, or apprentice.

Enacting section 1. This amendatory act takes effect 90 days after the date it is enacted into law.