Michigan legislative update: noncompetes and independent contractors

Two bills presently pending in the Michigan House of Representatives could alter the rules for enforcing noncompetition agreements and determining which individuals qualify as independent contractors in Michigan.

Noncompetition agreements

House Bill (HB) 4874 would amend the Michigan Antitrust Reform Act to restrict the use of noncompetition agreements. It would require an employee/applicant to be provided with written notice of a noncompete agreement and the proposed terms before hiring, as well as a posted notice of rights.

Noncompetition agreements wouldn't be enforceable against individuals who earn less than $15 per hour ($31,200 per year). The bill also would render choice-of-law provisions invalid if inconsistent with the Michigan law.

The penalties available under the proposed law would include a mandatory civil penalty of $5,000 for each employee subject to a violation, assessment of attorneys' fees to a prevailing employee, and payment of all lost income as a result of actual or threatened enforcement of a void/unreasonable noncompetition agreement.

Independent contractors vs. employees

HB 4877 would amend the Michigan Wages and Fringe Benefits Act to prohibit employee misclassification. It would establish a new test for an independent contractor status.

To qualify as an independent contractor, an individual must: