In November 2022, Democrats took control of Michigan’s legislative bodies and passed several employee-friendly laws. These include the amendment of the Elliott-Larsen Civil Rights Act to prohibit workplace discrimination based on sexual orientation, gender identity, and gender expression; repeal of the right-to-work law, allowing union security agreements to require employees to pay union dues; and restoration of prevailing wages for state construction projects. This law requires contractors on state projects to pay union-level wages.
Several other laws are also under consideration. These include SB 142, which mandates pay transparency; SB 143/HB 4399, which would prohibit non-compete agreements for “low-wage employees”; HB 4035, which mandates predictive scheduling requirements for certain employers; and HB 4240, a credit history ban law prohibiting hiring decisions based on an applicant’s credit history.
House Bill 4399 submitted April 12, 2023 and Senate Bill 143 submitted March 7, 2023 (differ slightly), and if passed are poised to dramatically change restrictive covenants in Michigan. As currently proposed, restrictive covenants would be narrowed to (a) only non-competition agreements, (b) exclude low-wage employees, (c) require disclosure and notice prior to hiring, and (d) mandates the burden of reasonableness on the employer. This is bolstered by the recent FTC proposal returning to pre-1980s antitrust law, which would ban all restrictive covenants agreements. However, although the bills narrow restrictive covenants to only apply to non-competition agreements, under current Michigan law that could shift all other restrictive covenants (i.e. non-solicitation) from the “reasonableness test” to the commercial antitrust “rule of reason” which is applied to business-to-business transactions. This could result in an expansion of non-solicitation type restrictive covenants, which when well drafted have the same affect as non-competition type restrictive covenants.
While these proposed laws, if passed, won’t affect all employees immediately they would absolutely change the landscape of antitrust law and employment law. The new laws will require many employers to make changes to their internal policies and review their agreements with employees. Furthermore, employers should consider training their management teams on these changes to ensure full compliance.
