Michigan Non-Compete and Non-Solicitation Agreements in Hospitality

Michigan Non-Compete and Non-Solicitation Agreements in Hospitality: Key Takeaways

• The FTC issued a nationwide ban on non-competes in April 2024, but a federal injunction has paused enforcement.
• Michigan courts generally enforce non-compete agreements that protect legitimate business interests and are reasonable in scope, typically up to one year.
• Non-solicitation agreements remain enforceable if reasonable in duration and scope.

Understand the current legal landscape for non-compete and non-solicitation agreements affecting Michigan’s hospitality sector as of 2025.

Learn how evolving federal and state regulations impact employers seeking to protect their business interests while complying with the law.

1. Overview of Non-Compete Agreements in Michigan Hospitality

Non-compete agreements restrict employees from working for competitors or within the same industry for a specified period and geographic region after leaving a job.

In Michigan’s hospitality industry — which includes hotels, restaurants, and related services — these agreements aim to protect sensitive business information and client relationships in a competitive market with high turnover.

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2. Federal Update: The FTC Rule and Its Current Status

On April 23, 2024, the Federal Trade Commission (FTC) enacted a sweeping rule banning non-compete agreements nationwide to boost worker mobility.

This rule was expected to prohibit non-competes in all sectors, including hospitality. However, a federal judge issued an injunction in August 2024 that halted implementation, allowing non-competes to remain legal as governed by state laws.

The legal battle over this rule continues, so Michigan employers should stay alert to potential federal changes affecting non-compete enforceability.

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3. Key Michigan State Law Requirements for Non-Compete Agreements

Michigan courts enforce non-compete agreements only if they satisfy specific standards designed to balance employer protection and employee rights.

• Legitimate Business Interest: The employer must demonstrate that the agreement protects valid interests, such as trade secrets, confidential data, or customer goodwill.
• Reasonableness: The restrictions must be reasonable in terms of duration (generally up to one year), geographic area, and the type of restricted activities.

Agreements that are overly broad or too long risk being deemed unenforceable by Michigan courts.

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4. Non-Solicitation Agreements in Michigan Hospitality

Non-solicitation agreements prevent a former employee from soliciting the employer's clients or employees for a specified time.

In Michigan, these agreements remain enforceable if their scope and duration are reasonable and clearly defined.

This makes non-solicitation clauses a favored tool for hospitality employers seeking to prevent client poaching or employee raiding without imposing the broader restrictions of a non-compete.

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Advantages of Non-Solicitation Over Non-Compete in Hospitality

• Less restrictive on employee mobility, making them easier to enforce.
• Focus on protecting specific business interests like customers and workforce without limiting entire job opportunities.
• Can enhance goodwill and trust between employers and employees by mitigating overly broad restrictions.

5. Implications and Best Practices for Michigan Hospitality Employers

Given the nuanced and evolving legal landscape, hospitality employers in Michigan should adopt careful strategies regarding these agreements.

Review and Update Existing Agreements

Conduct a thorough review of existing non-compete and non-solicitation clauses to ensure compliance with Michigan’s requirements for reasonableness and legitimate interest.

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Consider Alternatives Like Non-Disclosure Agreements

Employers may protect sensitive information without restricting employee employment prospects by using non-disclosure agreements (NDAs), which prohibit sharing confidential information but do not restrict job mobility.

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Provide Clear Notice and Communication

Transparent communication with prospective and current employees about any restrictions and their scope helps reduce disputes and fosters trust.

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Monitor Federal and State Legal Developments

Stay informed on ongoing legislative and regulatory changes, including the potential reactivation or modification of the FTC rule, as well as Michigan state bills that may affect low-wage workers.

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6. Will Michigan’s Proposed Bill Affect Non-Competes for Low-Wage Hospitality Workers?

House Bill 4399, introduced in April 2023, aims to prohibit non-compete agreements for workers earning less than approximately $34,307 annually (138% of the federal poverty level).

Though not yet enacted as of August 2025, this bill could notably impact lower-paid hospitality staff, a large sector of workers in this industry.

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Employers should monitor the bill’s progress and prepare to adapt policies accordingly if it passes into law.

7. Useful Resources for Michigan Employers on Non-Compete and Non-Solicitation Agreements

• Federal Trade Commission (FTC) — for updates on federal regulations affecting non-competes.
• Michigan Legislature — track bills and state laws related to employment agreements.
• Michigan Department of Labor and Economic Opportunity — guidance on labor standards and employee rights.

Michigan Non-Compete and Non-Solicitation Agreements in Hospitality: Conclusion

The current legal environment in Michigan still allows enforceable non-compete and non-solicitation agreements in the hospitality industry if they are reasonable and protect legitimate business interests.

However, given the federal injunction on the FTC non-compete ban and pending state legislation, employers must remain vigilant, periodically revisiting their policies and agreements to ensure compliance and foster fair labor practices.

Adopting transparent, reasonable restrictions and considering less restrictive alternatives like non-disclosure agreements can help hospitality businesses protect themselves while supporting employee mobility.

To lessen reliance on restrictive covenants, focus on reduce employee turnover.