Sherrod v. Genzyme Corp. , 170 F. App'x 375 ( 2006 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 06a0167n.06
Filed: March 2,2006
Case No. 05-1217
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
LAURA SHERROD, )
)
Plaintiff-Appellant, )
) ON APPEAL FROM THE
v. ) UNITED STATES DISTRICT
) COURT FOR THE EASTERN
GENZYME CORPORATION, ) DISTRICT OF MICHIGAN
)
Defendant-Appellee. )
)
_______________________________________ )
)
)
BEFORE: BOGGS, Chief Judge and BATCHELDER, Circuit Judges; WEBER*, District
Judge.
ALICE M. BATCHELDER, Circuit Judge. Plaintiff-Appellant Laura Sherrod appeals
the district court’s dismissal on summary judgment of her case against Defendant-Appellee
Genzyme Corp. (“Genzyme”), in which she alleged that Genzyme violated two Michigan statutes
by requiring that she sign a non-compete agreement as a condition of her employment. The district
court rejected this argument, ruling that the statutes in question did not generally ban non-compete
agreements. Because a more recent statute authorizes reasonable non-compete agreements, and
because cases subsequent to the enactment of the statutes cited by Sherrod evince a general approval
of non-compete agreements, we AFFIRM the judgment of the district court dismissing Sherrod’s
*
The Honorable Herman J. Weber, United States District Judge for the Southern District of Ohio, sitting by
designation.
statutory claim.
The facts of the case are not in dispute. Sherrod began her employment with Genzyme in
1997 and, following a brief absence, was offered re-employment by letter dated March 29, 2002.
The offer included the following condition: “Please know that your offer of employment is
contingent upon your signing of this Agreement and your continued willingness to abide by its
terms.” The “Agreement” referenced in the offer is the Genzyme Corporation Agreement, which
included a restrictive covenant in which the employee agreed not to work for certain employers for
a period of one year after ceasing employment with Genzyme. Sherrod signed the Agreement on
March 30, 2002, and was thereafter employed in Michigan as a clinical account executive. In
September, 2003, Genzyme terminated her employment. Following her termination, Sherrod was
offered employment by entities she was prohibited from working for by virtue of the restrictive
covenant in the Agreement. Genzyme refused to release Sherrod from the Agreement.
Sherrod then filed the instant suit in district court, claiming that Genzyme’s requirement that
she sign the non-compete agreement as a condition of employment violated M.C.L. §§ 408.478(1)
and 750.351. M.C.L. § 408.478(1) provides for the following:
An employer, agent or representative of an employer, or other person having
authority from the employer to hire, employ, or direct the services of other persons
in the employment of the employer shall not demand or receive, directly or indirectly
from an employee, a fee, gift, tip, gratuity, or other remuneration or consideration,
as a condition of employment or continuation of employment. This subsection does
not apply to fees collected by an employment agency licensed under the laws of this
state.
M.C.L. § 750.351 states, in relevant part:
Any employer or agent or representative of an employer or other person having
authority from his employer to hire, employ, or direct the services of other persons
in the employment of said employer, who shall demand or receive directly or
indirectly from any person when in the employment of said employer, any fee, gift
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or other remuneration or consideration . . . in consideration or as a condition of such
employment or hiring or employing any person to perform such services for such
employer or of permitting said person to continue in such employment is guilty of
a misdemeanor.
Genzyme, in turn, notes that M.C.L. § 445.774a(1) specifically authorizes non-compete
agreements like the one contained in its Agreement. M.C.L. § 445.774a(1) provides for the
following:
An employer may obtain from an employee an agreement or covenant which protects
an employer’s reasonable competitive business interests and expressly prohibits an
employee from engaging in employment or a line of business after termination of
employment if the agreement or covenant is reasonable as to its duration,
geographical area, and the type of employment or line of business. To the extent any
such agreement or covenant is found to be unreasonable in any respect, a court may
limit the agreement to render it reasonable in light of the circumstances in which it
was made and specifically enforce the agreement as limited.
Sherrod’s case, which generally disregards M.C.L. § 445.774a(1), centers on her contention
that §§ 408.478 and 750.351 prohibit employers from conditioning employment upon the signing
of a non-compete agreement (or any other kind of “consideration”). She cites Sands Appliance
Services, Inc. v. Wilson, 615 N.W.2d 241 (Mich. 2000) in support of her position. We find Sands
inapposite because it did not deal with a non-compete agreement. It involved instead a tuition
contract, under which an employer charged an employee $50 per week for certain job training. Id.
at 243-44. The employee argued that § 408.478 rendered the tuition contract an illegal “fee, gift,
tip, gratuity, or other remuneration or consideration, as a condition of employment or continuation
of employment.” The court noted the very broad definition of “consideration” provided by the Sixth
Edition of Black’s Law Dictionary and held that the tuition contract’s payment arrangement fell
within that definition, thus violating § 408.478. Id. at 247. The court also relied on ejusdem generis,
a doctrine of statutory interpretation that mandates that general words must be interpreted in light
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of any specific words that precede them. Id. Accordingly, the court construed the general term
“consideration,” which followed the specific terms “fee, tip, gratuity, or other remuneration,” to
include the employee’s tuition payments to the employer. Id. Finally, the court wrote that §
408.478's legislative purpose was to “prohibit the selling of jobs,” and “to prevent kickbacks or
payments of any kind to an employer in return for employment or its continuation.” Id. Because
the tuition payment was a payment made by an employee to an employer as a condition of continued
employment, it violated the statute. Id.
Sherrod argues that the Sands court adopted a broad, traditional definition of “consideration”
and that a similar definition should apply to the restrictive covenant contained in Genzyme’s
Agreement. But even if we found Sherrod’s argument persuasive, we could not adopt it here
because Michigan enacted the aforementioned M.C.L. § 445.774a(1) in 1987. It provides that “[a]n
employer may obtain from an employee” a reasonable non-compete agreement. Because the statute
was enacted after § 750.351 and § 408.478, which became law in 1931 and 1978, respectively, it
supersedes them to the extent of any conflict. Consequently, M.C.L. § 445.774a(1)’s specific
authorization of non-compete agreements trumps the other statutes’ inclusion of such agreements
within their general prohibition on “consideration” as a condition of employment. See Travelers Ins.
v. U-Haul of Mich., Inc., 597 N.W.2d 235, 239 (Mich. Ct. App. 1999) (“[T]he rules of statutory
construction . . . provide that a more recently enacted law has precedence over the older statute.
This rule is particularly persuasive when one statute is both the more specific and the more recent.”
(internal citation omitted)). We also note that, although Michigan courts have not dealt with the
specific question of whether §§ 408.478 and 750.351 prohibit non-compete agreements as a
condition of employment, they have consistently indicated that reasonable non-compete agreements
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are enforceable. See Bristol Window & Door, Inc. v. Hoogenstyn, 650 N.W.2d 670 (Mich. Ct. App.
2002) (enforcing non-compete agreement, and noting long history of enforcing such agreements in
Michigan); Rehmann, Robson & Co. v. McMahan, 466 N.W.2d 325 (Mich. Ct. App. 1991) (per
curiam) (enforcing a narrowly drawn non-compete agreement, even though it was governed by the
pre-Michigan Antitrust Reform Act law, which was less favorable for non-compete agreements);
Compton v. Joseph Lepak, D.D.S., P.C., 397 N.W.2d 311 (Mich. Ct. App. 1986) (noting that the
Michigan Antitrust Reform Act, even prior to the addition to it of § 445.774a, enacted a policy in
Michigan whereby reasonable non-compete agreements are enforceable).
Despite this wealth of case law, Sherrod points out that no Michigan case has directly
addressed whether §§ 408.478 and 750.351 prohibit non-compete agreements as a condition of
employment. Furthermore, she asserts that because § 445.774a(1) only authorizes non-compete
agreements between “employers” and “employees,” it does not apply to her; she was merely a job
applicant when Genzyme required her to sign the Agreement. Sherrod’s argument is fallacious.
While a literal reading of “employee” and “employer” might bring about Sherrod’s desired result
under § 445.774a, applying a similarly literal reading to §§ 408.478 and 750.351– the statutes on
which she depends– would make them inapplicable to this case. Section 408.478 prohibits
“employer[s]” and their agents from “demand[ing] or receiv[ing], directly or indirectly from an
employee, a fee, gift, tip, gratuity, or other remuneration or consideration, as a condition of
employment or continuation of employment,” (emphasis added), and § 750.351 prohibits
“employer[s]” and their agents from making similar demands on any “person” or “employee” “when
in the employment of said employer.” We can think of no reason why the word “employee” should
mean one thing in one statute, and something else in two others. Finally, the broad interpretation
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of §§ 408.478 and 750.351 urged by Sherrod would make any consideration required of an
employee–such as the mere promise to show up at work or wear a uniform–an unlawful requirement.
We cannot sanction such an absurd result. See People v. Fetterley, 583 N.W.2d 199, 206 (Mich. Ct.
App. 1998) (noting that literal constructions of a statute that produce unreasonable results
inconsistent with the statute’s purposes are to be avoided).
Accordingly, we AFFIRM the district court’s grant of summary judgment in favor of
Genzyme.
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