FTC Bans Noncompete Clauses Giving Michigan Workers More Options

Michigan workers will soon have more employment options as the Federal Trade Commission has voted to enact a federal ban on noncompete clauses.

Noncompete agreements prevent employees from going to work for competitors within their own industry or starting a new business in same general space as their current employers. The agreements usually specify a certain time period after an employee leaves a job and may include geographical restrictions.

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The ruling, which will take effect in 120 days, will ban new noncompete agreements. For high-level senior executives, existing noncompetes can remain in place but for all other employees existing noncompete agreements will no longer be enforceable.

Noncompete Agreements in Michigan

Michigan is one of 45 US states that currently allows employers to require noncompete agreements for their employees. (California, Colorado, Oklahoma, North Dakota, and Minnesota have fully banned the practice.)

• 55% of Michigan employers require at least one employee to sign a noncompete agreement.
• 38% of Michigan employers require all employees to sign noncompete agreements.
• These percentages are among the highest of the largest US states, according to Michigan Advance.

According to Michigan law, Noncompetes have generally been deemed enforceable in our state if they are "reasonable in scope, duration, and geographical limitation" in order to protect companies' trade secrets.

Michigan Has Failed to Ban Noncompete Agreements in the Past

In 2020, there was support for a bill that would have banned the agreements for employees whose wages were at or below 138% of the poverty level (about $14.50 per hour), but that bill didn't make it out of committee.

A similar bill was introduced in 2022, but that bill did not receive a hearing before a committee.

The new ruling could affect tens of millions of workers and about 30 million Americans who have existing noncompete agreements.

Opponents say the ruling would "undermine American businesses' ability to remain competitive."