Michigan Bankers Association Memo, HB 4874 - Opposed

Summary

Memo dated 1/16/2020 from Alexander J. Morris, Advocacy Manager of the Michigan Bankers Association, to members of the Michigan House Commerce & Tourism Committee, stating the association's opposition to HB 4874 (H-1). It objects to restricting non-compete agreements for low wage employees, saying the choice is most appropriately made by the business and that bank jobs such as tellers and personal bankers are often privy to proprietary information. It calls the penalty of voiding a non-compete for failure to notify applicants in writing before their interview not commensurate with the offense. It also opposes a one-way mandatory attorney fee provision and urges members to vote against reporting the bill.

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Memo
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Michigan Bankers Association

To: Members of Michigan House Commerce & Tourism Committee
From: Alexander J. Morris, Advocacy Manager

Date: 1/16/2020

Re: HB 4874 - Opposed

The Michigan Bankers Association (MBA) opposes HB 4874(H-1). While we appreciate the
proposed substitute which addressed some of our concerns that we have shared, there remains some
major shortcomings that still seek resolution.

e Restriction of Non-Compete Agreements to Low Wage Employees: While we
recognize some potential reasons to consider limiting non-compete agreements required by
low wage employees in certain circumstance for certain reasons, we believe that choice is
most appropriately made by the business in the context of their business model,
competitors, and current state of their industry. Most banks do not require non-compete
agreements for low wage employees, however many jobs in a bank, including positions like
tellers and personal bankers, must often be privy to proprietary information of their
employer in order to do their job. Like many other business sectors, each bank has unique
strategies and concepts that drive day-to-day operations.

*® Failure to Notify Penalty: We believe the penalty associated with failure to notify
applicants in writing prior to their interview of a possible non-compete agreement places an
unequitable burden to an already over-burdened human resources function. To void a non-
compete agreement altogether for a failure to notify in writing is a penalty that is not
commensurate with the offense.

© One-Way Mandatory Attorney Fee Provision: Language on page 3 lines 5 & 6 and
subsequent sections a) and b) establish a one-way mandatory attorney fee provision. Under
this legislation, it is possible that if a court chooses to change a non-compete agreement in
ways that have no immediate impact, the business would still be responsible for significant
cost. For example, should a court wish to reduce the duration of a non-compete (say from 2
years to 1) but holds that all other aspects of the agreement are appropriate, which happens
frequently, the employer may be required under this legislation to pay the ex-employee
damages, fees, and court costs in whole. On the other hand, if an employer is successful in
enforcing an appropriate non-compete, they do not have the right to recover their costs.

Until these issues have been resolved, we remain opposed to HB 4874 and urge you to vote against
reporting the bill to the House Ways & and Means Committee. Thank you for your consideration

of our concerns.


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