Alabama’s New Non-Compete Act Goes Into Effect January 1, 2016

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If you do business in Alabama, and you require employees to sign non-competition and non-solicitation agreements, will these documents still be enforceable after January 1, 2016? The answer is a qualified maybe.

When Alabama Governor Robert Bentley signed House Bill 352 into law back in June, 2015, he repealed Alabama’s bare bones restrictive covenant statute and replaced it with a detailed codification of much of Alabama’s restrictive covenant case law. The new law largely reflects Alabama’s friendly attitude towards restrictive covenants, but it also tightens enforcement standards in some areas and makes some significant changes to the old law, the most prominent of these being it shortens the non-solicitation agreement period and the restrictive covenant time period for business owners who sell “business goodwill.” The new law states that restrictive covenants must be limited to the geographic area where the company operates a similar business, and a temporal restriction cannot exceed 2 years in basic run-of-the-mill employee/employer relationships. It also allows a court to alter or modify the restrictions that are overly broad or unreasonably long to preserve the protectable interest at issue.

In light of this law employers should review any existing non-competes and restrictive covenants, and make any changes necessary so as not to be in violation of geographic or temporal requirements. Employers should consult with an experienced restrictive covenants attorney to determine how best to craft reasonable restrictions under the circumstances.

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Posted In: Legal