In this context, a restrictive covenant is a clause in an employment contract that prohibits an employee from engaging in certain activities after their employment ends. These activities typically include competing with the former employer, soliciting clients or customers of the former employer, or soliciting other employees to leave the company.

Non-competition and non-solicitation clauses are both restrictive covenants. While non-competition clauses are framed so as to prevent an employee from working in a similar profession or field, usually within a specific geographic region and for a specified period of time. Non-solicitation clauses, on the other hand, are framed to prevent an employee from soliciting or doing business with the former employer’s clients, customers, or employees.

Although framed differently, they are both restrictive covenants prohibited by Michigan Antitrust law, unless they fit within an exception. To be enforceable these types of restrictive covenants are framed to protect a company’s legitimate business interests, such as trade secrets or confidential information.

Under Michigan law, these restrictive covenants are viewed through the lens of anti-trust principles. These principles generally aim to promote capitalism through fair competition and prevent practices that restrain trade. Non-competition and non-solicitation clauses, by their nature, (a) restrict a company from hiring and (b)restrict a person’s ability to freely use their experience and skills to find work.

Restrictive covenants stifle growth and competition, and in Michigan, restrictive covenants in employment are enforceable only to the extent that they are reasonable. Under the Michigan Antitrust Reform Act, a restrictive covenant must be reasonable as to its duration, geographical area, and the type of employment or line of business. It must also be necessary to protect the employer’s reasonable competitive business interests.

Furthermore, Michigan courts apply a reasonableness test, balancing the employer’s need to protect its legitimate business interests against any potential harm to the public and the undue burden on the employee. If a court determines that a non-competition or non-solicitation clause is overly broad or restrictive, it must declare it unenforceable or limit its scope to be reasonable. This makes it vital for employers to carefully draft such clauses to ensure they are reasonable and defensible.

There is a poignant weight to the last Monday of May. It is a day etched in somber shades, a day filled with flags unfurled at half-mast and punctuated by the solemn sound of Taps echoing through silent streets. Memorial Day, a cornerstone of the American calendar, serves as a solemn reminder of the ultimate sacrifices made by many in the service of our nation. Yet, the journey of Memorial Day, from informal observance to nationally recognized holiday, tells a story of evolving national consciousness.

The origins of Memorial Day, often attributed to a smattering of local observances in the years immediately following the Civil War, were as fragmented as the nation itself. During those early years, communities across the nation honored their fallen soldiers independently, their commemorations reflective of local traditions and sensibilities. It wasn’t until 1868 that General John A. Logan, leader of the Grand Army of the Republic, called for a national “Decoration Day” on May 30, unifying these disparate observances.

Yet, Memorial Day’s transformation from a ‘national’ observance to a federally recognized holiday reveals an intriguing tale of political wrangling and shifting societal priorities. It was not until the passage of the Uniform Monday Holiday Act in 1968, which went into effect in 1971, that Memorial Day became a federal holiday, moving its observance to the last Monday in May to ensure a three-day weekend.

The Act, aimed at providing federal employees with more three-day weekends, was met with controversy. Initially, critics argued that the move diluted the significance of Memorial Day, transforming it from a solemn day of remembrance into the unofficial start of summer. Despite the controversy, the Act highlighted an interesting dichotomy in American society: the balancing act between national remembrance and everyday pragmatism.

Moreover, the legal evolution of Memorial Day raises interesting questions about how we, as a nation, define and legislate commemoration. While Memorial Day is a federal holiday, making it a day off for federal employees and the cause for numerous closures, its observance varies greatly across states and even towns. There are no federal laws mandating how Memorial Day should be commemorated; that decision is left up to individual states, cities, and citizens.

This lack of legislative uniformity has allowed for a rich tapestry of Memorial Day traditions to flourish across the country, ranging from somber military parades to community barbecues. This flexibility within the law underscores one of the fundamental strengths of the American legal system: its ability to balance nationwide unity with regional individuality.

Finally, it’s worth reflecting on the broader legal and societal implications of Memorial Day. It serves as a moment of national reflection on the—cost of conflict and the value of sacrifice—concepts that form the backbone of our legal and political systems. It is a day that brings into focus the very rights and liberties that our legal system seeks to uphold, and the price paid by many to safeguard them.

From its fragmented beginnings to its current status as a federal holiday, Memorial Day serves as a mirror reflecting our nation’s history, our evolving legal landscape, and our collective values. It stands as a testament to the ongoing dialogue between national unity and local autonomy a dialogue that is the—very essence—of America.

Minnesota has made a significant shift in employment law, setting a potential trend for labor rights across the nation. On May 24, Gov. Tim Walz signed a transformative bill that outlaws non-compete agreements, with the new statute due to come into effect on July 1, 2023.

The legislation covers both employment and certain independent contractor agreements, curtailing post-termination restrictions that have historically limited employees’ rights to work for another employer for a specified period, within a certain geographic area, or in a capacity similar to their current role. It’s a move that advocates say will promote freedom and mobility in the workforce.

The law lays out a clear definition of independent contractors covered under this regulation. It focuses on individuals who operate contracts under their individual names or under entities they’ve formed themselves, particularly those who do not receive payments reported to the Internal Revenue Service via a W-2 form.

Another significant provision curbs the power of employers to enforce out-of-state arbitration or legal proceedings. Employers can no longer make such conditions of employment for those who primarily live and work within Minnesota.

However, not all forms of restrictive agreements are eradicated. The law continues to uphold agreements tied to the sale or dissolution of a business, agreements designed to protect trade secrets or confidential information, and non-solicitation agreements that limit the use of client lists.

With the introduction of this law, businesses in Minnesota are advised by Minnesota lawyers to review and possibly revise their employment and restrictive covenant agreements. The goal is to ensure compliance with the new legislation, while still maintaining protection over their business interests.

Minnesota’s move sends a clear signal to other states about the potential reshaping of employment law to favor worker mobility and freedom. The bill marks a departure from traditional labor constraints and could spur similar legislative changes across the country, as lawmakers balance the interests of businesses and employees in the rapidly evolving world of work.

The full impact of this law remains to be seen. However, it undoubtedly represents a bold stride towards boosting competition in the labor market.

As identified in an earlier article, careless drafting of severance agreements, such as by relying on the confusion surrounding restrictive covenants named non-solicitation clauses, will inevitably lead to an unraveling of employer protections.

In a time when corporate America stands on the precipice of change, severance agreements, long a staple in the business world, are a subject of spirited debate. Often misunderstood, they serve as an important tool in a company’s arsenal, offering both economic security to the departing employee and legal protection to the employer. It’s a balance that is as delicate as it is necessary.

Severance agreements are not merely transactions; they’re strategic agreements designed to safeguard both parties during employment transitions. For the departing employee, the severance package offers an essential safety net during the uncertain period of job transition. These packages typically include a lump sum payment, benefits extension, and sometimes, outplacement services to assist in finding a new position.

Yet, beyond this, severance agreements also serve a greater purpose. They offer closure, a defined end to the professional relationship. With the signing of a severance agreement, both parties can move forward with certainty and finality.

For corporate America, the value of the severance agreement lies in its ability to manage risk. These agreements often include provisions such as non-disparagement clauses and legal claim waivers that protect the company’s reputation and limit the potential for costly and time-consuming litigation.

The inclusion of these clauses is not a cynical exercise of corporate power. Rather, it’s a reflection of the reality that businesses operate in a complex, litigious environment. These protections allow companies to continue their operations undisturbed, focusing their energy and resources on growth, innovation, and employee wellbeing.

However, corporate America is aware of the need for balance. It is essential that these agreements do not inhibit an employee’s future employment prospects, and that they are not used to mask inappropriate behavior or unfair practices. High-profile cases in the pandemic era have underscored the importance of maintaining ethical standards and transparency, lessons that resonate across the corporate landscape.

Critics argue that restrictive covenants like non-solicitation, non-compete and non-disparagement clauses unfairly restrict an employee’s professional mobility. While it’s true these provisions can limit certain actions post-employment, it’s essential to understand that the objection should be to protect trade secrets and client relationships, rather than to punish the departing employee. Restrictive covenants are falling out of favor, and employers who fail to adapt may face a harsh repercussions.

There’s also an increasing trend among corporations to provide more comprehensive separation packages to lower-level employees, not just top executives. This is part of a larger shift toward employee-focused policies, recognizing that every employee’s contribution is essential to the organization’s success.

The challenge lies in creating severance agreements that reflect both the needs of the corporation and balancing the cost of purchasing employee rights. This is where negotiation plays a crucial role. And the process of negotiation can ensure that the agreement meets the needs of both parties and withstands any legal challenge.

The role of the severance agreement in the modern corporate landscape is clear. It serves as a crucial bridge during periods of transition, a tool to protect corporate interests, and an opportunity to show good faith to departing employees. The task for corporate America is to continue refining these agreements, ensuring that they remain fair, balanced, and beneficial for all parties involved.

In the wake of the roaring economic juggernaut, the severance agreement, a long-standing corporate mainstay, has quietly evolved from a simple ‘golden handshake’ to a complex, multifaceted instrument. Typically offered to employees upon their departure, these agreements have traditionally served to provide (a) financial cushioning in the form of severance pay and (b) corporate security from real and frivolous litigation.

Severance agreements have increasingly filtered down the corporate hierarchy, reaching even rank-and-file employees. The modern severance agreement is as likely to be offered to the mid-level manager as it is to the C-suite executive, often including a mix of financial compensation, continuation of benefits, and occasionally, outplacement services.

Simultaneously, we’ve seen a broadening in the scope of these agreements. They frequently include non-compete (extensions) and non-disparagement clauses, tying former employees to a web of legal obligations even after their tenure has ended. As many employees are discovering, these clauses can limit their future career opportunities, a reality that seems at odds with the initial generosity of a severance package.

In response, several states have taken action. California, North Dakota, and Oklahoma, for example, have imposed strict limitations on the enforcement of non-compete agreements, citing the detrimental impact on employees’ ability to find new employment. Still, the practice remains widespread in the rest of the Country or simply name it something else.

For example, in response to the reasonableness rule regularly being applied in the favor of employees, the growing trend in employment contracts and severance agreements is to name the restrictive covenant: non-solicitation. Trial courts having dealt with non-competition clauses for so long, are blindsided at preliminary injunctive hearings and have regularly ruled in favor of employers. This trend is unlikely to last. Simply put: if a non-solicitation agreement were different from a non-competition agreement, the non-solicitation agreement would be prohibited as a violation of antitrust law. The reality is, non-solicitation agreements are simply another form of restrictive covenant, and under Michigan law they are legal, provided they are also reasonable.

Severance agreements increasingly include language requiring departing employees to waive any potential legal claims against their employer, effectively silencing potential whistleblowers or litigants. This phenomenon took center stage in the pandemic era, where several high-profile cases revealed that severance agreements had been used to mask inappropriate behavior and workplace discrimination.

As we look to the future, the severance agreement stands at an intriguing crossroads. On one hand, they offer vital financial support for employees facing an uncertain future. On the other hand, they can suppress employees’ rights and limit their career mobility. It’s a delicate balance that the courts, lawmakers, and, most importantly, employers themselves will need to negotiate.

Indeed, the landscape of severance agreements reflects the ongoing evolution of the American workplace. They are, in essence, a mirror of the societal values we choose to uphold, and of the protections we believe employees should enjoy. As we witness the next chapter of the American work culture unfold, it’s a safe bet that the humble severance agreement will continue to play a pivotal role. How we choose to shape it, however, is a question that remains unanswered.