The Michigan Antitrust Reform Act, MCL 445.771, et seq. (the “Act”) makes it unlawful for persons to contract in restraint of trade or commerce:
“A contract, combination, or conspiracy between 2 or more persons in restraint of, or to monopolize, trade or commerce in a relevant market is unlawful.”
MCL 445.772. Such legal restriction would seem on its face to make “unlawful” an agreement between an employer and employee preventing the employee, post-employment, from soliciting business from the employer’s customers – i.e., the traditional “non-solicitation” restriction found in employment relationships.
Until recently, such “non-solicitation” restrictions were given enforceability under Section 774a of the Act [MCL 445.774a] which exempts from the Act’s proscription “an agreement or covenant which protects an employer’s reasonable competitive business interests”:
“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.”
[Emphasis added]. State another way, even though a traditional “non-solicitation” restriction would otherwise be “unlawful” under Section 772 of the Act, Section 774a carves out an exception to unlawfulness if such restriction (1) “protects an employer’s reasonable competitive business interests” and (2) is reasonable in duration, geographical area and scope of restriction.
However, the Michigan Court of Appeals, in the published case of Total Quality v Fewless, ____ Mich App _____ (July 9, 2020), held:
“The provision at issue in this case is a nonsolicitation agreement, and defendants have not cited authority in support of the contention that nonsolicitation agreements are subject to MCL 445.774a(1).”
Kent County Business Court Judge Yates relied on this holding to rule a non-solicitation restriction could not take advantage of the last sentence of Section 774a – i.e., be “rewritten by the court” to be made reasonable [Symonds v Lighthouse Insurance Group, 10/21/20 Opinion].
If the Total Quality court and Judge Yates are correct, and Section 774a of the Act does not apply to non-solicitation restrictions, then non-solicitation restrictions are not protected from being rendered unlawful by Section 772 of the Act. In other words, non-solicitation restrictions could be attacked under Section 772 as an unlawful restraint of trade or commerce.
If you are an employer or employee with questions about this analysis, please do not hesitate to contact Bob Sosin at 248-642-3200 or robert@asnlaw.com.