Michigan Non-Compete Law in 2025: What Employees and Employers Need to Know
Disclaimer: This article is intended for general informational purposes only and does not constitute legal advice. Laws and their application vary by jurisdiction and by the specific facts of each case. Please consult a licensed attorney for guidance specific to your situation.
A Changing Landscape Worth Paying Attention To
Michigan has historically permitted non-compete agreements as long as they protect a legitimate business interest and are reasonable in scope, duration, and geography. That framework has been in place for decades. But 2025 brought a significant development that every employer and employee in the state should be aware of.
House Bill 4040, introduced in January 2025, would fundamentally reshape how Michigan handles non-compete agreements. This article focuses on what HB 4040 proposes, where it stands as of the time of writing, and what is currently enforceable under existing law. For a broader overview of how non-competes work under current Michigan law, see our article on non-compete agreements in Michigan.
What HB 4040 Would Do
Michigan House Bill 4040, introduced on January 30, 2025 by State Representative Denise Mentzer, proposes to amend the Michigan Antitrust Reform Act to essentially prohibit non-compete agreements for workers across the state.
If enacted in its introduced form, HB 4040 would:
• Prohibit businesses from entering into, enforcing, or even representing the existence of non-compete agreements with workers
• Cover a broad definition of workers, including employees, independent contractors, interns, volunteers, and apprentices
• Apply retroactively to non-compete agreements entered into before, on, or after the effective date
• Take effect 90 days after enactment
• Allow workers to sue employers who attempt to enforce a prohibited non-compete, with potential recovery of lost income plus attorney fees
• Permit class action lawsuits and prohibit arbitration clauses in non-compete disputes
The only exceptions under the bill as introduced are for workers who sell their ownership stake in a business, or who are responsible for selling substantially all of the business's assets. In those contexts, a non-compete tied to the business sale would still be permissible.
If passed, Michigan would join California, Minnesota, North Dakota, and Oklahoma as one of the only states in the country with a broad prohibition on employee non-competes.
Where HB 4040 Stands as of August 2026
As of the time of this writing, HB 4040 has not been enacted into law. After being introduced in January 2025 and electronically reproduced on February 4, 2025, the bill was referred to the House Economic Competitiveness Committee, where it remains at an introduced stage with approximately 25 percent progression through the legislative process.
Michigan employers and employees should monitor this legislation. While the bill has not passed, the fact that it was introduced reflects a clear policy direction in the Michigan legislature toward greater restrictions on non-compete agreements, consistent with a broader national trend. Whether HB 4040 passes in its current form, is amended, or stalls entirely, the conversation around non-competes in Michigan has shifted.
What Remains Enforceable Under Current Michigan Law
Until and unless HB 4040 is enacted, Michigan's existing framework continues to govern. Under the Michigan Antitrust Reform Act as currently written, non-compete agreements are permitted if they:
• Protect a reasonable competitive business interest of the employer
• Are reasonable in duration, typically no more than one year as a general benchmark
• Are reasonable in geographic scope, often limited to the area where the employer actually does business
• Are reasonable in the type of employment or activity restricted
Michigan courts retain the authority to blue-pencil, or modify, agreements they find overbroad rather than voiding them entirely. A court may narrow an unreasonable restriction and enforce the rest. This means that even an overbroad non-compete may carry some legal weight if it contains provisions that are independently reasonable.
Current Michigan case law also makes clear that non-competes must protect against unfair competitive advantage, not simply suppress ordinary competition or prevent a departing worker from using general skills and knowledge they developed on the job.
What Employers Should Be Doing Now
Regardless of whether HB 4040 passes, the current moment is a good time for employers to review their existing non-compete agreements and practices. Specifically:
Audit Existing Agreements
Review the non-compete agreements currently in use or on file with former employees. Are the restrictions tailored to protect specific legitimate interests, or are they broader than necessary? An agreement that would already be unenforceable under current law offers little protection and creates legal risk.
Consider Alternative Protections
Even if HB 4040 passes and employee non-competes are broadly prohibited, certain other restrictive covenants would likely remain permissible. These include confidentiality and trade secret protections, non-solicitation agreements limited to specific customers or employees, and garden leave arrangements. Employers who rely solely on broad non-competes to protect their interests may benefit from diversifying their approach.
Consult With an Attorney Before Enforcing
Attempting to enforce a non-compete that a court finds unreasonable, particularly in an environment where enforcement is under increasing scrutiny, can expose an employer to liability for the employee's legal fees and other costs. Before sending a cease and desist or seeking an injunction against a former employee, getting legal advice on the strength of the restriction and the likelihood of enforcement is important.
What Employees Should Be Doing Now
For employees who have signed non-compete agreements, the current landscape is worth understanding:
A Signed Agreement Is Not Automatically Enforceable
Under current Michigan law, signing a non-compete does not mean every provision will be enforced as written. Courts evaluate reasonableness. An overbroad restriction may be modified or declined. If you have concerns about a non-compete you signed, an attorney can help you assess how likely it is to hold up under scrutiny.
Do Not Assume HB 4040 Has Already Changed Your Situation
Until HB 4040 is enacted and takes effect, current law applies. Employees who assume their non-compete is no longer valid because of the proposed legislation, and who act on that assumption by joining a competitor, may be exposed to enforcement action under existing law. Understanding what the bill proposes and what current law requires are two different things.
Act Quickly If You Receive a Cease and Desist
If a former employer sends you a letter claiming you are violating a non-compete, time matters. Employers who seek court injunctions can move quickly, and responding effectively requires prompt legal counsel. Do not sign anything or make commitments without speaking with an attorney first.
The Broader National Context
Michigan's HB 4040 reflects a national trend. The Federal Trade Commission attempted to ban non-competes nationally in 2024, but that rule was struck down by a federal court before taking effect. In the absence of a federal rule, individual states have moved aggressively to restrict non-competes on their own. Several states, including California, Minnesota, and North Dakota, already have broad prohibitions in place.
The direction of travel is clear, even if the pace varies by state. Businesses and employees in Michigan who have not yet considered how changes to non-compete law might affect their situation should do so sooner rather than later.
Serving Employees and Employers in Oakland, Wayne, and Macomb Counties
Emily K. Catania represents both employees and employers in non-compete disputes and employment litigation throughout Metro Detroit and Southeast Michigan. She is recognized as a Super Lawyers Rising Star since 2021 and by Best Lawyers: Ones to Watch for 2026. Both in-person and virtual consultations are available.
The information in this article is provided for general informational purposes only and does not constitute legal advice. Michigan non-compete law is subject to change, and the status of HB 4040 may have changed since this article was written. Please consult a licensed attorney for guidance tailored to your specific situation.
Have Questions About a Non-Compete Agreement in Michigan? Whether you are an employee concerned about enforcement or an employer reviewing your agreements, Emily K. Catania can help you understand your position under current Michigan law. Contact our office today.
