Employers are often concerned with protecting “their” clients, wondering what they can do to make sure former employees do not take and/or benefit from the connections they made while employed. For the most part, clients and/or client information cannot be considered an employer’s “property;” however, as discussed below, controlling case law in Michigan has established that the anticompetitive use of confidential business information, including clients’ confidential information, is considered a legitimate business interest, which employers have the right to protect.
Generally, a former employee is entitled to the unrestricted use of general information acquired during the course of his or her employment, or information generally known in the trade or readily ascertainable. Whirlpool Corp v Burns, 457 F Supp 2d 806, 812 (WD Mich, 2006), quoting Follmer, Rudzewicz & Co, PC v Kosco, 420 Mich 394, 402; 362 NW2d 676 (1984). However, preventing the anticompetitive use of confidential information is a legitimate business interest. Confidential information, including information regarding customers, constitutes property of the employer. Rooyakker & Sitz, PLLC v Plante & Moran, PLLC, 276 Mich App 146, 158; 742 NW2d 409 (2007); Follmer, 420 Mich at 402.
An employee who establishes client contacts and relationships as the result of the goodwill of his employer’s business is in a position to unfairly appropriate that goodwill and thus unfairly compete with a former employer upon departure. St Clair Med, 270 Mich App at 268; Frontier Corp v Telco Communications Group, Inc, 965 F Supp 1200, 1208-1209 (SD Ind, 1997) (applying Michigan law); Follmer, 420 Mich at 406.
The Michigan Court of Appeals has held that an agreement between an employer and its former employee which prohibited the former employee from soliciting or providing services to the employer’s clients for a two-year period, without any geographical limits, was reasonable. Rooyakker, 276 Mich App at 158.
In Rooyakker, accountants sued their former employer, Plante Moran, seeking, inter alia, a declaration that their employment agreements with Plante Moran were unreasonable and unenforceable, and interfered with their business expectation and/or business relationships. See generally, Rooyakker, supra. Specifically, the accountants challenged the agreement where it restricted them from providing accounting services to any of Plante Moran’s clients for a period of two (2) years following their employment. Id.
The Rooyakker court held that such an agreement was reasonable, where it did not preclude the accountants from providing accounting services to new clients; the agreement merely prevented them from providing accounting services to the clients of its former accounting firm. Rooyakker, 276 Mich App at 158.The Rooyakker court further held that such an agreement is consistent with allowing Plante Moran to protect a legitimate business interest, such as preventing the anticompetitive use of confidential information. Id. Accounting services, by their very nature, involve confidential client information. Id.