Monday, January 26, 2009
Michigan Case Illustrates Breadth of Legitimate Employer Interests (Edwards Publications v. Kasdorf)
Michigan traditionally is a state which readily enforces non-competes. A recent dispute involving competitors in the advertising circular business demonstrates the broad array of legitimate business interests which will support an otherwise reasonable non-compete in Michigan.
Tracy Kasdorf was a sales representative for Edwards Publications, who left to take a similar position with Bilbey Publications. From the court opinion, there is no indication what the exact wording of Kasdorf's non-compete restricted in the way of competitive activity. That said, it was clear she was working in direct competition with Edwards to solicit businesses for the placement of advertisements in a free circular distributed to shoppers.
In 1985, Michigan enacted a new non-compete statute as part of the Michigan Anti-Trust Reform Act. The statute has been interpreted broadly, conferring upon the courts the ability to recognize a fairly wide range of legitimate business interests which can support a non-compete agreement. (In most states, an employer must not only demonstrate that the covenant is reasonable, but also that it is used to protect something - a legitimate business interests - the law deems acceptable.)
In reversing a summary disposition for Kasdorf on the non-compete agreement, the court noted as follows:
"By going to work for Bilbey, where Kasdorf's accounts would be with many of those same customers or where those customers would be subject to not-so-cold cold calls, Kasdorf would be gaining and taking an unfair advantage in competition with Edwards after years of acquiring a unique insight into various business operations thanks to her employment with Edwards."
The court went on to emphasize the "goodwill and strong personal relationships" developed by Kasdorf with accounts. In this sense, Michigan is more expansive in its recognition of a legitimate business interest than some other states. While states, such as Illinois, tend to disfavor covenants involving sales of ordinary goods or services, Michigan makes no such distinction. It also will recognize the amorphous term of "goodwill" as a protectable interest in the employment context - a concept amenable to use by any creative attorney.
Court: Court of Appeals of Michigan
Opinion Date: 1/20/09
Cite: Edwards Publications, Inc. v. Kasdorf, 2009 Mich. App. LEXIS 109 (Mich. Ct. App. Jan. 20, 2009)