Carol Lundberg has a good article on the current state of Michigan law concerning the applicability of non-compete agreements to lawyers. Michigan Rule of Professional Conduct Rule 5.6 states,
A lawyer shall not participate in an offering or making of: (a) an employment or other similar type of agreement that restricts the right of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement or as permitted in Rule 1.17; or (b) an agreement in which a restriction on the lawyer’s right to participate is part of the settlement of a controversy between private parties.
Under this rule, lawyers cannot be restricted by non-compete agreements except in relation to retirement benefits or as a settlement of a controversy. The reason for this broad prohibition, the article recognizes, is that prohibitions on lawyer non-compete agreements promote client choice. Client choice is promoted in both the legal and medical fields, and despite the fact that attorneys do not own their client files and are not allowed to ask clients to follow them when they move to a new practice, lawyers are entitled to inform clients that they are leaving their current practice and that they will be moving to a new practice.
Michigan is one of only four states that allow non-compete agreements to be enforceable against lawyers in limited situations. Recently, the Michigan Court of Appeals upheld a non-compete contract that required a departing partner to pay 25-75% of the fees and costs that were advanced by the firm where the former partner retained cases that he had while at the firm. Other states have struck down these types of provisions. The Michigan Court of Appeals also recently upheld a fee splitting agreement between a departing lawyer and his former firm.
The article also makes an important point about what firms can protect when a lawyer departs. Law firms can protect their trademarks with trademark registration to prevent a departing lawyer from using the mark. Outside of limited situations, however, law firms simply cannot prevent a departing lawyer from competing.