Business owners often hear the phrase “non-compete agreement” and immediately think of the familiar employment situation: an employee leaves a company, joins a competitor, and the former employer tries to restrict what that employee may do next. That is the setting most people associate with Michigan non-compete law, and it is also the setting that produces much of the public debate over employee mobility, unequal bargaining power, and whether workers should be free to take their skills to a new job.
But not every covenant not to compete is an ordinary employment restraint. In Michigan, a non-compete agreement connected to the sale of a business can stand on different legal and practical footing than a standard employee non-compete. The reason is straightforward. In a business sale, the buyer is often purchasing more than equipment, inventory, vehicles, phone numbers, customer lists, and a website. The buyer is also paying for goodwill, reputation, customer relationships, referral relationships, vendor trust, confidential information, and the expectation that the company will continue operating as a going concern.
A January 28, 2026 Kent County Business Court opinion illustrates this important distinction. In Integrated Exteriors, Inc. v. Chris Obenchain and Ophoff Companies, Inc., the court treated the restrictive covenant as ancillary to an asset purchase agreement and the transfer of goodwill, not as a standard employee non-compete.¹ That framing matters for Michigan business owners because a court may evaluate a sale-of-business non-compete through the lens of the transaction itself rather than through the narrower lens of post-employment mobility.
Michigan Non-Compete Law Treats Context as Important
Michigan’s employee non-compete statute permits an employer to obtain a covenant from an employee if the agreement protects the employer’s reasonable competitive business interests and is reasonable as to duration, geographic area, and the type of employment or line of business restricted.² That statute is important, but its primary focus is the employer-employee relationship. It addresses agreements where an employee may be signing the restriction as a condition of employment or continued employment.
A sale-of-business non-compete has a different commercial purpose. When a person sells a business, especially a closely held business, the buyer may pay a purchase price that reflects the company’s expected future value. That value may depend heavily on whether customers, contractors, referral sources, vendors, and employees continue to associate the business with reliability and continuity after closing. If the seller can immediately turn around and compete for the same customers, the buyer may not receive the full benefit of the bargain.
Michigan courts have long recognized that restrictive covenants connected to the sale of a business are different from covenants imposed in ordinary employment contracts. In Woodward v. Cadillac Overall Supply Co., the Michigan Supreme Court explained that employee restraints have historically been scrutinized more closely than covenants incident to a business sale, in part because sellers and buyers are more likely to be negotiating over consideration in a commercial transaction.³ The Court also recognized the practical reality that some restraint on the seller may be necessary for the buyer to receive the full value of the goodwill purchased.³
Why Sale-of-Business Non-Competes Protect Goodwill
For many business owners, goodwill is the most important asset being transferred in a sale. Goodwill is the reason customers return. It is the reason a general contractor invites the company to bid again. It is the reason referral sources continue sending work. It is the reason employees may stay after a change in ownership. It is the reason a buyer is willing to pay more than the liquidation value of equipment, inventory, and accounts receivable.
In service businesses, construction trades, professional practices, distribution companies, and closely held local businesses, goodwill may be closely tied to the seller’s personal reputation. Customers may know the seller by name. Vendors may have extended favorable treatment because of years of trust. Employees may have remained loyal because of the seller’s leadership. If that seller immediately moves to a competitor or starts a competing company, the goodwill sold to the buyer may be placed at risk.
That is why Michigan sale-of-business non-competes are often viewed differently from ordinary employment restraints. A buyer is not merely trying to prevent someone from earning a living. The buyer is trying to protect the value of the asset it purchased. In Bryan v. Lincare, Inc., a federal court applying Michigan law explained that, from the purchaser’s standpoint, a non-competition covenant can be indispensable to assuring that the purchaser receives the full value of what is being purchased.⁴
The Kent County Business Court Opinion Offers a Modern Example
The Kent County Business Court’s January 28, 2026 opinion is useful because it applies these principles in a modern Michigan asset-sale dispute. The court noted that the asset purchase agreement included intangible assets and specifically included the goodwill and going-concern value of the business.¹ The court treated goodwill as including customer relationships, reputation, confidential information, and the expectation that the business’s value would not be immediately diminished by competition from the sellers or their principals.¹
That is the practical point for Michigan business owners considering a business purchase or sale. The buyer may be purchasing continuity. The buyer may be paying for an existing market position. The buyer may be relying on the seller’s promise not to immediately reclaim the very customer relationships, reputation, and goodwill that were sold at closing.
The court also emphasized that the covenant was not merely an employment agreement. The seller later worked for the buyer, but the court concluded that his post-closing employment did not convert the agreement into an ordinary employment-based restrictive covenant.¹ The agreement was executed in connection with the asset sale, was linked to the purchase agreement, and was supported by the consideration paid for the business and its goodwill rather than merely by wages or continued employment.¹
For business owners, this is a major drafting lesson. If a Michigan non-compete agreement is intended to protect a business acquisition, the documents should say so clearly. The covenant should be tied to the asset purchase agreement, membership interest purchase agreement, stock purchase agreement, or other transaction document. The agreement should identify the goodwill, customer relationships, confidential information, and going-concern value being transferred. It should not read like a generic employee non-compete inserted into a closing package as an afterthought.
Commercial Non-Competes Are Not Always Employment Non-Competes
Michigan law also distinguishes commercial non-competes from employee non-competes more broadly. In Innovation Ventures, LLC v. Liquid Manufacturing, LLC, the Michigan Supreme Court held that commercial non-compete agreements are evaluated under the antitrust rule-of-reason framework rather than the employee non-compete standard in MCL 445.774a.⁵ That does not mean every commercial restraint is enforceable. It means the analysis is different.
The focus in a commercial restraint is not simply whether the restriction is reasonable to the individual who is restrained. Courts may examine the business context, the relevant market, the purpose of the restriction, the condition of competition before and after the restraint, and whether the covenant unreasonably harms competition.⁵ This broader commercial framework reinforces the central point: the legal treatment of a non-compete depends heavily on the context in which it was created.
For Michigan business owners, this means the words “non-compete agreement” do not answer the legal question by themselves. A court will want to know whether the covenant arose from an employment relationship, a business sale, a commercial supply relationship, a franchise relationship, or some other business arrangement. The purpose of the covenant matters. The consideration matters. The scope matters. The connection between the restriction and the business interest being protected matters.
Drafting a Michigan Sale-of-Business Non-Compete
A sale-of-business non-compete should be carefully drafted. Business owners should not assume that a court will enforce any restriction simply because it appears in a purchase agreement. The covenant should be reasonable in light of the business sold, the market involved, the consideration paid, and the goodwill transferred.
For buyers, the agreement should identify the specific business being sold and the competitive activity being restricted. The territory should be connected to the company’s actual market. The duration should be defensible in light of the time needed to transition customer relationships and goodwill. The covenant should be supported by the transaction consideration and expressly tied to the sale. Buyers should also consider whether non-solicitation, confidentiality, trade secret, non-disparagement, and customer-transition provisions may protect the transaction more precisely than a broad non-compete standing alone.
For sellers, the lesson is to treat the covenant as part of the purchase price negotiation. A seller who receives consideration for goodwill may later be held to the promise not to impair that goodwill. The seller should understand what activities are restricted, how long the restriction lasts, what geography is covered, whether passive investment is allowed, whether employment in a different role is permitted, and whether the covenant applies to affiliates, family members, future entities, or related companies.
The transition-employment scenario deserves special attention. Many sellers stay with the buyer after closing to help transition customer relationships and operations. That can be beneficial for both sides. But if the covenant is intended to protect the business sale, the documents should preserve that distinction. The covenant should make clear that it was given in connection with the sale and the goodwill transferred, not merely because the seller became an employee after closing.
The Federal Non-Compete Landscape Also Recognizes the Distinction
The distinction between employee non-competes and sale-of-business covenants is not unique to Michigan. The Federal Trade Commission’s 2024 Non-Compete Clause Rule, although later vacated, included an exception for non-competes entered into pursuant to a bona fide sale of a business entity, a person’s ownership interest, or all or substantially all of a business entity’s operating assets.⁶ In September 2025, the FTC announced that it was acceding to the vacatur of that rule and dismissing related appeals.⁷
For Michigan business owners, that federal history is useful because it reinforces the same basic commercial distinction. Even broad efforts to restrict worker non-competes have recognized that seller covenants in bona fide business sales serve a different purpose. The policy concern is not the same when the restricted party is receiving sale proceeds for transferring business value and goodwill.
Key Takeaway for Michigan Business Owners
Michigan sale-of-business non-competes are not ordinary employment restraints. They are often transaction protections designed to preserve the goodwill, customer relationships, reputation, confidential information, and going-concern value that the buyer paid to acquire.
The January 28, 2026 Kent County Business Court opinion is a helpful reminder that courts may look past the label “non-compete” and examine the covenant’s real function. If the covenant is tied to an asset sale, supported by sale consideration, and directed at preserving purchased goodwill, it may be treated differently from a standard employee non-compete.¹
For buyers, the lesson is to draft the covenant as part of the business transaction, not as a generic employment restriction. For sellers, the lesson is to understand that a promise made in exchange for purchase consideration may carry real post-closing consequences. For both sides, the best practice is the same: define the goodwill being transferred, connect the restriction to the deal, keep the scope tied to the business sold, and make the covenant reasonable enough to defend if the transaction later ends up in court.
This article is for general educational purposes only and is not legal advice. Business owners considering the purchase or sale of a Michigan business should consult counsel about the specific transaction, documents, and competitive risks involved.
Contact Tishkoff PLC specializes in business law and litigation. For inquiries, contact us at www.tish.law/contact/. & check out Tishkoff PLC’s Website (www.Tish.Law/), eBooks (www.Tish.Law/e-books), Blogs (www.Tish.Law/blog) and References (www.Tish.Law/resources).
References and Sources
¹ Integrated Exteriors, Inc. v. Chris Obenchain and Ophoff Companies, Inc., Kent County Circuit Court Business Court, Case No. 25-20949-CBB, Opinion and Order dated January 28, 2026.
² Michigan Compiled Laws § 445.774a, “Agreement or covenant protecting business interests of employer; applicability of section.”
³ Woodward v. Cadillac Overall Supply Co., 396 Mich. 379 (1976).
⁴ Bryan v. Lincare, Inc., Civil No. 99-74625, United States District Court for the Eastern District of Michigan, Opinion dated January 20, 2000.
⁵ Innovation Ventures, LLC v. Liquid Manufacturing, LLC, 499 Mich. 491 (2016).
⁶ Federal Trade Commission, Non-Compete Clause Rule, Final Rule published May 7, 2024.
⁷ Federal Trade Commission, Federal Trade Commission Files to Accede to Vacatur of Non-Compete Clause Rule, press release dated September 5, 2025.