Severance Red Flags in Michigan: Noncompetes, Nonsolicits & NDA Overreach

For many professionals and executives, a severance agreement feels like a final formality—a way to part on professional terms and secure a financial cushion. But hidden in the fine print are clauses that can quietly limit your future employment, your business opportunities, and even your right to speak freely. These restrictive covenants—noncompete clauses, nonsolicitation provisions, and nondisclosure agreements (NDAs)—can follow you long after your last paycheck.

Employers include these terms to protect their interests, but too often, they go too far. A single clause can prevent you from working in your industry for a year or more, bar you from contacting clients you built relationships with, or silence you from discussing workplace issues entirely. And because these restrictions are often buried in legal language, many employees sign without realizing the long-term consequences.

What makes this even more important today is that Michigan law is changing. The state—and the nation—are seeing a major shift in how restrictive covenants are treated. Lawmakers and courts are increasingly skeptical of noncompete and overbroad NDA provisions. Michigan’s legal landscape is evolving toward greater employee freedom, limiting how far companies can go to control where and how former workers earn a living.

Red Flag #1 — The Overbroad Noncompete

A noncompete agreement is meant to protect an employer’s legitimate business interests—like trade secrets or customer relationships—by restricting where and for whom you can work after leaving the company. In theory, it prevents unfair competition. In practice, it often becomes a tool for control that limits your right to earn a living.

Noncompetes have come under growing scrutiny nationwide, and Michigan is no exception. The state has begun to move toward narrowing or even banning noncompetes in most employment situations, especially for non-executive roles. Legislators and courts alike have recognized that these clauses often do more harm than good, preventing skilled professionals from advancing their careers and suppressing wages across industries.

Even so, many employers continue to include noncompetes in severance agreements, hoping that fear of a potential lawsuit will discourage you from joining a competitor. That’s why understanding the red flags is essential before you sign.

Signs of an Overbroad Noncompete

If a noncompete clause looks like any of the following, it’s likely overreaching—and potentially unenforceable:

• Applies to “any competitor,” rather than those in direct competition with your former employer.
• Lasts longer than 12 months, which is generally viewed as excessive unless there’s a very strong business justification.
• Covers an unlimited or statewide geographic area, even if your role was limited to one region or market segment.
• Includes vague references to “confidential information” without defining what that means, leaving the door open for future disputes.

Why Overbroad Noncompetes Often Fail—But Still Intimidate

Michigan courts have long held that noncompetes must be reasonable in time, territory, and scope to be enforceable. Clauses that reach too far can be struck down or rewritten by a judge. However, even unenforceable noncompetes can cause real harm before they ever reach the courtroom.

Here’s why: most potential employers don’t want the risk of being sued. If they learn you’re bound by a noncompete—even one that’s likely invalid—they may simply move on to another candidate. The clause doesn’t have to hold up in court to hold you back in real life.

Red Flag #2 — The Nonsolicitation Trap

Not all restrictive covenants stop you from working for a competitor—some simply make it impossible to build relationships or grow your business after you leave. That’s where nonsolicitation clauses come in.

A nonsolicitation agreement prohibits you from reaching out to certain people after your employment ends—typically your former company’s clients, customers, or employees. While employers have a legitimate interest in protecting key relationships, these clauses are often written so broadly that they cut you off from your own professional network.

Two Types of Nonsolicitation Clauses

1. Client Nonsolicitation (Restricting Business Development)

This clause bars you from contacting or doing business with your former employer’s customers.
At first glance, that may sound reasonable—but many agreements go too far, extending to any client the company has ever had, even if you had no personal relationship or involvement.

For executives, sales professionals, and business development leaders, this can be devastating. It prevents you from leveraging years of professional goodwill and can effectively block you from operating in your industry.

2. Employee Nonsolicitation (Restricting Recruiting Former Colleagues)

This type prevents you from hiring or recruiting anyone who worked at your former company.
When narrowly tailored, this can be fair—protecting an employer from mass talent raids. But when written broadly, it can prohibit even casual professional interactions, including referencing a former colleague for an open position or collaborating in a new role.

Why Nonsolicits Hit Hardest for Leaders and Client-Facing Roles

Executives, managers, and sales professionals depend on relationships—they’re the foundation of business success. A poorly drafted nonsolicitation clause can chill those relationships overnight. It can stop you from calling long-term clients, referring trusted peers, or even networking within your field.

Because these provisions are often hidden in severance paperwork and phrased in dense legal terms, many professionals sign without realizing how restrictive they are—until it’s too late.

Common Red Flags to Watch For

A nonsolicitation clause may be overreaching if it:

• Applies to any client or customer, not just those you personally serviced.
• Extends longer than 12 months, especially in fast-moving industries.
• Penalizes “indirect solicitation”—for instance, if your new employer reaches out to a former client, even without your involvement.

Red Flag #3 — NDA Overreach

Not all nondisclosure agreements (NDAs) are bad. In fact, when written properly, an NDA serves a legitimate and important purpose: protecting a company’s trade secrets, confidential business data, client lists, or proprietary technology. These clauses ensure that employees and executives don’t take sensitive information to competitors or use it for personal gain.

But increasingly, NDAs are being stretched far beyond their intended scope. Some employers use them as tools to silence employees, discouraging them from discussing workplace issues, pay inequities, or even unlawful conduct. That kind of overreach not only harms workers—it can violate public policy and the law.

When NDAs Go Too Far

An overbroad NDA can act like a gag order, restricting what you can say long after you’ve left the company. Some agreements try to prohibit discussing nearly every aspect of your work experience, even if that information isn’t sensitive or proprietary. Others go so far as to threaten penalties if you speak with regulators or colleagues about your employment.

Here are some common examples of NDA overreach:

• Prohibiting discussion of harassment, discrimination, or retaliation.
  Employees have the right to speak about workplace misconduct. Any NDA that tries to cover up illegal behavior is unlawful and unenforceable.
• Silencing employees from speaking with regulators, the EEOC, or the Michigan Department of Civil Rights (MDCR). No company can stop you from reporting potential violations to government agencies. Both Michigan and federal law explicitly protect your right to do so.
• Labeling nearly all internal information “confidential,” even when it’s public data.
  Some companies use vague definitions of “confidential” that encompass everything from meeting schedules to job descriptions—language that’s impossible to follow and legally questionable.

The Law Protects Whistleblowers and Transparency

It’s important to remember that Michigan and federal law protect employees who report or discuss illegal activity, including discrimination, harassment, safety violations, and wage issues. No NDA, no matter how strongly worded, can override those rights.

Overbroad NDAs are often written to intimidate rather than to protect. They rely on employees not knowing their rights—and fearing the cost of speaking up.

When You Leave a Job, Know What You’re Signing

Your severance agreement should help you move forward—not hold you back. It’s meant to close one chapter and give you the financial and professional stability to begin the next. Unfortunately, buried clauses like noncompetes, nonsolicits, and overreaching NDAs can quietly do the opposite—restricting your freedom, limiting your opportunities, and keeping you tied to a company you’ve already left.

You’ve worked hard to build your career and your reputation. You’ve earned the right to continue that success freely and on your own terms. Don’t let a vague or overreaching clause in your severance paperwork limit where you can work, who you can contact, or what you can say about your own experience.

Before signing anything, take the time to have your agreement reviewed by a qualified employment attorney. A skilled lawyer can spot red flags, negotiate fair revisions, and make sure your severance truly protects your interests—not just your employer’s.

If you’ve been offered a severance agreement that includes a noncompete, nonsolicit, or NDA, contact Batey Law Firm, PLLC today. We’ll review the fine print, protect your rights, and help you negotiate fair, enforceable terms.

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