Non-Solicitation Agreements in Michigan

This article is educational content and does not constitute legal advice. Consult a qualified Michigan attorney for guidance on your specific situation.

What a Non-Solicitation Agreement Does in Michigan

A non-solicitation agreement restricts a specific, identifiable harm: the former employee reaching out to customers they built relationships with on your company's dime, or recruiting your team members away. It is not a prohibition on working. That distinction matters enormously in Michigan courts.

Unlike a non-compete, which limits where or for whom a person can work, a non-solicit targets conduct, not occupation. A loan officer subject to a non-solicit can go work for a competing lender the day after they resign. They simply cannot call the 47 borrowers they closed loans for last year and invite them to follow.

Michigan's Antitrust Reform Act, MCL 445.774a, governs both types of agreements and requires that any restrictive covenant be reasonable in duration, geographic scope, and the type of employment or line of business restricted. Because a customer non-solicit does not restrict geography or occupation in the way a non-compete does, it is less likely to fail on those grounds. That advantage disappears, however, if the drafting is sloppy.

Customer Non-Solicits vs. Employee Non-Solicits: Two Distinct Clauses

Michigan courts treat these as legally separate obligations, and employers who bundle them into a single vague paragraph create problems for both.

A customer non-solicitation clause prohibits the former employee from directly contacting former clients to solicit their business. It does not prohibit those clients from calling the former employee on their own initiative. It does not prohibit the employee from working in the same market or serving new customers they had no prior relationship with. The clause must be tied to customers the employee actually served, not every customer on the company's master list.

An employee non-solicitation clause prohibits the former employee from recruiting coworkers to follow them. It does not prohibit the former employee from posting a general job advertisement or responding to an unsolicited application from a former colleague who found the listing independently.

Consider a concrete example. A senior loan officer leaves a regional mortgage company and joins a direct competitor. A properly written customer non-solicit means she cannot email her former borrowers saying "I've moved, let's work together again." She can, however, open a branch in the same city, advertise on LinkedIn, and close loans for borrowers who find her through that advertising. A properly written employee non-solicit means she cannot call her former processing team and pitch them on joining her new branch. She can post a job listing for processors that her former colleagues happen to see and apply for on their own.

Drafting these as two separate, precise clauses is not a formality. Courts that find one clause overbroad will scrutinize the other more closely.

What Michigan Law Requires for Enforceability

MCL 445.774a sets up a three-part reasonableness test. A Michigan court will assess whether the restriction is reasonable in:

1. Duration. How long does the restriction run? Shorter periods are easier to defend. Multi-year restrictions require stronger justification tied to the nature of the relationships at stake.
2. Geographic scope. Customer non-solicits are often drafted without a geographic boundary, covering only the specific customers the employee served. That approach generally survives better than attaching an overbroad territory.
3. Type of employment or line of business restricted. The restriction must bear a rational relationship to the employer's legitimate interest. A mortgage employer restricting a loan officer from soliciting former borrowers satisfies this requirement more cleanly than restricting them from all financial services activity.

The threshold question before any of that analysis is whether the employer has a protectable interest, meaning something worth protecting that the law recognizes. In plain language, a protectable interest is a genuine business asset that the employee had meaningful access to and that would give them an unfair competitive advantage if they exploited it after departure.

In the lending context, Michigan appellate authority confirms that customer lists and confidential business information can qualify. The Michigan Court of Appeals in Coates v. Bastian Brothers, Inc., 276 Mich App 498 (2007), affirmed that customer lists and proprietary business information are legitimate protectable interests, provided the employer can show the information was not publicly available and was developed with company resources. A pipeline report, a CRM export with rate history and loan preferences, a referral source network built using the company's marketing budget: all of these are strong candidates.

Customer goodwill developed at the employer's expense is also a recognized protectable interest. When a company pays for the loan officer's marketing, covers their conference attendance, and funds the referral relationships they cultivate with real estate agents and builders, the resulting goodwill belongs to the company, not the employee.

Consideration is the other enforceability requirement that Michigan employers most often get wrong. An agreement signed at the start of employment is straightforward: the job itself is the consideration. An agreement signed after employment has already begun requires something more. Michigan courts have treated continued employment alone as inconsistent consideration for post-hire agreements. A documented raise, promotion, signing bonus, or access to a proprietary database or training program provides a cleaner foundation. Document it in writing, at the time of signing, and tie it explicitly to the agreement.

Drafting Checklist: What a Solid Michigan Non-Solicit Includes

Use this checklist when reviewing an existing agreement or drafting a new one.

What does not belong in a non-solicit: overbroad geographic language copied from a non-compete template, catchall language covering all prospective customers regardless of prior contact, and restrictions on the employee's ability to respond to a borrower who independently initiates contact.

Where Companies Go Wrong

These are the mistakes Michigan mortgage employers make most often, and each one has a direct cost.

Copying a non-compete template and relabeling it a non-solicit. The result is a document that looks like a non-solicit but reads like a non-compete. Courts notice. A clause that prohibits the employee from working with any customer in the state is a non-compete dressed in the wrong label, and it will be treated accordingly.

Covering all current and prospective customers instead of those the employee served. This is the most common overbreadth problem. A loan officer who handled residential refinances in West Michigan did not cultivate a relationship with every commercial borrower in the company's Michigan portfolio. Claiming otherwise destroys the targeted-harm rationale that makes non-solicits more defensible than non-competes.

Relying on continued employment as consideration without documentation. If the agreement was signed six months after hire and the only consideration was "your ongoing employment," you have a problem. Michigan courts have not treated that uniformly as adequate consideration, and without documentation, you cannot prove what was exchanged.

Assuming blue-penciling will save a facially overbroad clause. Some Michigan employers draft aggressively and assume a court will simply trim the agreement to something reasonable. Courts apply blue-penciling inconsistently. A clause that is unreasonable on its face may simply be voided rather than reformed. The safety net is not reliable enough to build a strategy on.

Waiting too long after departure to act. Injunctive relief, which is the remedy that actually stops the solicitation, requires evidence of ongoing or imminent harm. If you wait three months to preserve your pipeline data, document the calls your former clients received, and send a demand letter, the factual record you need has degraded and the urgency that supports emergency relief has dissipated.

If any of these errors describe an agreement currently in your files, a review before a departure happens is significantly less expensive than litigation after one. Our employment law team reviews Michigan restrictive covenant agreements and identifies enforceability gaps before they become courtroom problems.

When a Former Loan Officer Starts Calling Your Clients

The immediate post-departure period is when the agreement either works or does not. Here is a practical sequence.

Step one: preserve evidence. Before you send anything, lock down your records. Pull the pipeline report as of the employee's last day. Export the CRM contact history for the clients they served. Capture any communications showing what data the employee accessed in their final days. This evidence supports both a breach of contract claim and, if applicable, a trade secret claim under the Michigan Uniform Trade Secrets Act, MCL 445.1901 et seq. For a deeper look at how trade secret claims interact with employee departures, see our briefing on protecting confidential business information under Michigan law.

Step two: send a written demand. A demand letter that identifies the specific prohibited conduct and the specific agreement provision at issue accomplishes two things. It puts the former employee and, if relevant, their new employer on notice of the claim. It also establishes a date certain for the record, which matters when you later need to show the court that you acted promptly.

Step three: assess whether the conduct also triggers the Michigan Uniform Trade Secrets Act. A former employee who merely remembers client names presents a non-solicitation problem. A former employee who exported your CRM, forwarded pipeline reports to a personal email, or took a contact file on their last day presents a trade secret problem on top of it. Under MCL 445.1903, a Michigan court may grant emergency injunctive relief to prevent actual or threatened misappropriation of a trade secret. Irreparable harm, in plain terms, means harm that money cannot fully repair after the fact: losing a borrower relationship permanently to a competitor is the kind of harm courts recognize as supporting emergency relief.

The inbound contact distinction matters here. If a former borrower calls the departed loan officer on their own initiative, that call is not a violation of a properly written non-solicit. The non-solicit prohibits outbound solicitation by the employee, not the borrower's independent decision to follow them. Employers who try to enforce against inbound contact risk losing the entire clause on overbreadth grounds.

Federal NMLS licensing obligations and CFPB rules run on a parallel track and do not override your state-law non-solicit. But confirm that your agreement does not inadvertently prohibit the loan officer from responding to a borrower who initiates contact, which could conflict with NMLS disclosure obligations. Both sets of requirements should be reviewed together.

Blue-Penciling: Do Not Draft to the Safety Net

Blue-penciling is the power a Michigan court has under MCL 445.774a(1) to narrow an unreasonable restrictive covenant rather than void it entirely. In plain language: if your clause covers too much, a court might trim it to something enforceable instead of throwing it out altogether.

Michigan is more employer-friendly than states like California, which refuse to enforce restrictive covenants almost categorically. That is a genuine advantage, and it is worth protecting by drafting correctly.

The problem with treating blue-penciling as a drafting strategy is that courts apply it inconsistently. Some panels narrow and enforce. Others find a facially unreasonable clause so defective that reformation is not appropriate. You do not control which outcome you get. An agreement that is enforceable as written costs you nothing extra in drafting and gives you certainty in enforcement. An agreement that requires court reformation costs you litigation expense, delay, and uncertainty.

Draft to be enforced as written. Treat blue-penciling as the unpredictable last resort it is.

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Frequently Asked Questions

Is a non-solicitation agreement easier to enforce in Michigan than a non-compete?

Both are governed by MCL 445.774a and the same three-part reasonableness test covering duration, geographic scope, and the type of employment or line of business restricted. Non-solicits are narrower by design, targeting specific identifiable relationships rather than an industry or occupation, so they are less likely to fail the reasonableness test on geographic or occupational grounds. A well-drafted non-solicit is not automatically enforceable, however. It still requires adequate consideration and a reasonable scope tied to a genuine protectable interest.

Can a former employee be prohibited from doing business with a client who contacts them first?

A non-solicitation clause prohibits outbound solicitation by the former employee, not inbound contact independently initiated by a former client. If a former borrower calls a departed loan officer on their own initiative, that contact is generally not a violation of a properly written non-solicit. Employers who draft their non-solicits to cover all contact regardless of who initiated it risk overbreadth that can render the clause unenforceable. The clause should be precise: it restricts the employee's conduct, not the client's.

What consideration is required for a non-solicitation agreement signed after an employee is already hired?

Continued employment alone has been treated inconsistently by Michigan courts as adequate consideration for post-hire agreements. A documented promotion, raise, signing bonus, or access to proprietary training or databases provides stronger and more defensible consideration. The consideration and its connection to the agreement should be documented in writing at the time of signing. A handshake understanding documented six months later is not the same as a contemporaneous written acknowledgment.

What is blue-penciling and should Michigan employers count on it?

Blue-penciling is the court's power under MCL 445.774a(1) to narrow an overbroad clause rather than void it entirely. Michigan courts apply this power inconsistently: a facially unreasonable clause may simply be refused enforcement rather than reformed. Employers should draft for enforceability as written and treat blue-penciling as an unpredictable last resort, not a design feature. Michigan is meaningfully more employer-friendly than states that refuse to enforce restrictive covenants at all, but that advantage only holds when the agreement is well-drafted.

When does a non-solicitation breach also become a trade secret claim in Michigan?

When a departed employee does not merely remember client names but takes or exports confidential data such as a CRM list, pipeline report, or proprietary contact file, the conduct may trigger the Michigan Uniform Trade Secrets Act, MCL 445.1901 et seq. A trade secret claim opens the door to emergency injunctive relief under MCL 445.1903. The employer must be able to show the information was not publicly available and was developed with company resources. Preserving evidence of what data the employee accessed before departure is essential to that showing.

Do federal mortgage licensing rules affect whether a non-solicitation agreement is enforceable?

Federal mortgage regulations, including CFPB rules and NMLS licensing requirements, do not preempt or override Michigan state-law non-solicitation agreements. The two sets of obligations operate on parallel tracks. Employers should confirm, however, that their non-solicit does not inadvertently prohibit a loan officer from responding to a borrower who independently initiates contact, which could conflict with NMLS disclosure obligations. Reviewing the non-solicit alongside federal licensing requirements is a practical step worth taking before the agreement is signed, not after a departure.

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Review Your Agreements Before a Departure Forces the Issue

A non-solicitation agreement that has not been reviewed since it was signed, or that was adapted from a non-compete template without careful revision, is not an asset. It is a liability waiting to surface at the worst possible moment.

If you have loan officers, processors, or branch managers with access to client relationships, pipeline data, or referral networks, the time to confirm those agreements are enforceable is now, not when someone gives two weeks notice and you are trying to preserve a factual record while simultaneously managing a transition.

Our employment law team works with Michigan employers on restrictive covenant drafting, review, and enforcement. If you have an existing agreement you want evaluated, or you are facing a departure and need to assess your options, that is the right place to start.