Bill Summary – FastDemocracy

Legislative Analysis
                                                                                 Phone: (517) 373-8080
PERFORMANCE NONDISCLOSURE CLAUSES
                                                                                 http://www.house.mi.gov/hfa
House Bill 4588 as introduced                                                    Analysis available at
Sponsor: Rep. Annette Glenn                                                      http://www.legislature.mi.gov
Committee: Oversight
Complete to 3-25-21
SUMMARY:
           House Bill 4588 would create a new act to prohibit certain terms in certain state employment
           contracts and create a civil fine for a violation. The new act would apply to an employment
           contract entered into, amended, extended, or renewed on or after the bill’s effective date.
           Under the new act, the state could not enter into an employment contract with a state officer
           that includes a provision prohibiting the officer from disclosing information regarding the
           performance of his or her official duties unless one of the following conditions is met:
               • The provision is required by law.
               • The provision is included in an agreement or covenant that complies with section 4a of
                   the Michigan Antitrust Reform Act.1 (That section addresses what are commonly called
                   non-compete clauses.)
               • The provision is included in an agreement or covenant regarding a trade secret.
               State officer would mean either of the following:
                   • A head of a principal department of the executive branch of state government.
                   • A head of an agency within a principal department of the executive branch of state
                       government.
               Trade secret would mean information, including a formula, pattern, compilation, program,
               device, method, technique, or process, to which both of the following apply:
                  • It derives independent economic value (actual or potential) from not being
                       generally known to, and not being readily ascertainable by proper means by, other
                       persons who can obtain economic value from its disclosure or use.
                  • It is the subject of efforts that are reasonable under the circumstances to maintain
                       its secrecy.
           Penalty for a violation
           A state employee or officer who authorized a contract provision in violation of the new act
           would be responsible for a civil fine of up to $2,500 if the employee or officer knew, at the
           time of the authorization, that the provision was a violation of the new act. In addition, the
           attorney general could bring an action in circuit court in Ingham County for a violation. A civil
           fine collected for a violation or in a civil action brought by the attorney general would have to
           be submitted to the state treasurer for deposit in the state’s general fund.
1
    https://www.legislature.mi.gov/documents/mcl/pdf/mcl-445-774a.pdf
House Fiscal Agency                                                                               Page 1 of 2
FISCAL IMPACT:
        House Bill 4588 would have an indeterminate fiscal impact on the state and on Ingham
        County. The bill would add a civil fine of not more than $2,500 for any state employee or state
        officer that authorizes an employment contract provision that prohibits disclosing information
        regarding the performance of state employee’s/officer’s official duties unless certain criteria
        are met. Revenue collected from payment of civil fines ordered under the bill would be required
        to be deposited into the state’s general fund. Because there is no practical way to determine the
        number of violations that will occur under provisions of the bill, an estimate of the amount of
        additional revenue the state would collect cannot be made. The fiscal impact to Ingham County
        would depend on how provisions of the bill affected court caseloads and associated
        administrative costs.
        The bill could result in annual savings for state departments and agencies by prohibiting
        confidentiality or nondisclosure agreements for state officers that may include severance
        payments. Severance payments to state officers have been made infrequently and irregularly
        in the past and can vary significantly in amount. Severance payments, in some circumstances,
        can cover almost a year’s worth of salary, or over $150,000, and are supported through General
        Fund/General Purpose revenue.
                                                           Legislative Analyst: Susan Stutzky
                                                              Fiscal Analysts: Michael Cnossen
                                                                                Robin Risko
■ This analysis was prepared by nonpartisan House Fiscal Agency staff for use by House members in their
deliberations, and does not constitute an official statement of legislative intent.
House Fiscal Agency                                                    HB 4588 as introduced   Page 2 of 2