Here are the noteworthy trade secret and restrictive covenant posts from September and some of October:

Legislative Developments
  • Massachusetts is once again contemplating multiple bills regarding non-competes as well as a possible adoption of what appears to be the DTSA advises Russell Beck in his Fair Competition Blog.  Russell and his team also have summaries of legislative activity in Maryland, Maine, Michigan, New York, Oregon, Pennsylvania, Washington and West Virginia, among others.

Continue Reading Monthly Wrap Up (October 27, 2017): Noteworthy Trade Secret and Restrictive Covenant Posts from Around the Web

Michigan-2Legislative efforts to ban non-competes in Massachusetts and Minnesota have garnered lots of media attention over the past year or so, and now, a Michigan legislator has introduced a bill seeking a similar ban for Michigan’s companies and residents. Michigan House Bill 4198, introduced just over two weeks ago by State Representative Peter Lucido (R – Washington Township) seeks to ban non-competes in all employment situations. (A shout-out to Bernie Fuhs of Buzel & Long for announcing the bill’s introduction.)

House Bill 4198 limits restrictive covenants to agreements for the sale of a business (the bill also outlines conditions for the enforceability of those covenants), and to make clear those are the only restrictive covenants that will survive, the bill expressly states that, “any term in an agreement an employer obtains from an employee, contract laborer, or other individual that prohibits or limits the individual from engaging in employment is void.”

The ban proposed by Representative Lucido’s bill is very broad; too broad, in my view. By carving out the existing Michigan statute providing for the enforceability of non-competes that protect a reasonable business interest (Section 4a of MCL 445.774a), and replacing it with the new language above, the new bill would also effectively ban narrowly-tailored non-solicitation clauses, and potentially even confidentiality agreements. Under the new bill, an employee could legitimately take the position that in abiding by a confidentiality agreement, he or she is limited from engaging in employment with a competitor and have the agreement declared void, freeing the employee from any restriction on using, disclosing or sharing a former employer’s trade secrets. Consequently, if enacted, the bill could be extraordinarily disruptive to efforts by employers to protect trade secrets in Michigan, in addition to banning outright all restrictive covenants in the employment context.

According to Butzel & Long, the bill has been referred to the Michigan House’s Commerce and Trade Committee. Representative Lucido apparently has indicated that he is interested in moving the bill through committee as soon as possible.

While I certainly think reform for some categories of non-competes is in order (a discussion for another day), banning all restrictive covenants is akin to burning down the house to make toast. By making the bill so broad, Representative Lucido is throwing down the gauntlet to Michigan’s business community. In fact, bills seeking non-compete bans introduced in other states have failed due to similar overreaches because they better enabled the business community to generate grass roots opposition, due to their breadth.

The Trade Secret Litigator will monitor the bill’s progress closely and keep you posted.