Thus, the enforceability of these agreements is determined on a case-by-case basis. When deciding whether a non-compete obligation is enforceable, Alabama courts consider a number of factors, including whether the agreement is appropriate in terms of time and regional restrictions, and whether those restrictions impose undue hardship on the employee to find work. Legal Approval – The current version of Alabama`s Non-Competition Act, Ala. Code § 8-1-190 et seq., which came into effect in January 2016, largely retains the language of the previous law and codifies certain principles of Alabama jurisprudence. Areas where the law deviates most significantly from existing legislation include “reasonably reasonable” time limits for restrictions of competition [xiv] (see “lock-in period” below) and the conditions under which “no tenancy” contractual provisions may be applied. [xv] [i] Ala. Code § 8-1-197. Such a policy is based on the idea that non-compete obligations tend to deprive the public of efficient services and impoverish the individual. James S. Kemper & Co., S.E.c. Cox & Assocs., 434 So. 2d 1380, 1384 (Ala.
1984); Robinson v. Computer Servicenters, Inc., 346 So. 2d 940, 943 (Ala. 1977). Earlier this year, Alabama passed a new Non-Competition and Solicitation Act that repeals Section 8-1-1 of the Alabama Code (the “New Act”). While the new law maintains the current presumption against trade-restrictive contracts, it is even more restrictive than its predecessor. Poaching bans are specifically regulated. The treatment of solicitation prohibitions by the new law is an important change in the law. The Alabama Supreme Court ruled in 2006 that Alabama`s earlier version of § 8-1-1 did not regulate partial trade restrictions.
Subsequently, some courts have concluded that non-solicitation agreements do not require the identification of a protectable interest and are determined only by a notion of adequacy of scope and duration. However, the new legislation now appears to require an employer to have a protectable interest in enforcing a non-solicitation agreement and appears to impose other requirements similar to those necessary to enforce non-compete obligations. Consideration and other contract formation issues – In Alabama, job retention (including unlimited employment) is a sufficient consideration to support a non-compete clause or non-solicitation. [xvi] Performance/transferability of the successor company – Employers who enter into non-compete obligations through the sale of shares or mergers have the right to enforce agreements entered into by their predecessors. [xlix] However, employment contracts cannot be enforced by successor employers if they were added as a result of a sale of assets. [l] There is case law according to which an assignee of a non-compete obligation cannot assert the same thing against an employee[li], but the requirements of a subsequent decision suggest that enforcement by an assignee may be permitted. [lii] In particular, the new law presumably sets reasonable time limits for non-compete obligations and non-solicitation. One year is considered appropriate for agreements that prevent the seller of a company`s goodwill from competing with or promoting the buyer`s customers. In the case of non-compete obligations, two years are considered appropriate. Finally, it is assumed that 18 months is appropriate for solicitation prohibitions. New presumed deadlines.
The most notable amendment to the new law is the implementation of presumed deadlines of one year, 18 months and two years respectively for restrictive agreements on the sale of a business, non-solicitation and non-competition clauses. The new provision on the sale of a company`s goodwill can be very troubling, as Alabama courts have upheld the five-year prohibitions on non-competition and solicitation resulting from the sale of a business. For example, non-compete obligations must be geographically limited to be enforceable. Alabama courts have interpreted this to mean that non-compete obligations can only restrict competition in the same region where the former employer operates. They must also be limited in time. In Alabama, this means that restrictions of competition cannot be unlimited. In general, non-compete obligations can only restrict competition for a maximum period of two years. However, unreasonable hardship imposed on the employee will be taken into account in determining appropriate time and region restrictions. According to Alabama jurisprudence, courts have sometimes restricted or nullified certain parts of non-compete or non-solicitation obligations that are too broad in scope, geography or duration. The new law explicitly codifies that a court can now annul or limit these agreements or annul them in their entirety. The new law explicitly states: “Professional skills in themselves, without more, are not legitimate interests.” Many employers with non-compete obligations will disagree with this wording and will have to prove more than one professional qualification in order to enforce a non-compete obligation, such as .B.
Education, goodwill or other things that are defined as an interest worthy of protection under the new law. [xviii] See. e.B. Russell v. Mullis, 479 So. 2d 727, 729 (Ala. 1985) (“A person who has not signed or signed the Covenant is not bound by the provision not to do business and shall not be prohibited from competing with the Covenant”). Similarly, there are no “implicit” non-compete obligations. See e.B Joseph v. Hopkins, 158 So.
2d 660 (Ala. 1963) (no pact against competition implied by the sale of the goodwill of the economy). Wesley will host a free webinar on the new law on June 23, 2016. Information on how to register can be found under www.fordharrison.com/alabamas-new-non-compete-and-non-solicitation-act-six-months-in-and-still-no-answers. As you can see, although the new law clarifies some areas regarding contracts and post-employment commitments, these contracts remain nuanced. If you are an employee or employer and you are subject to or are attempting to be subject to a non-compete obligation, we strongly recommend that you contact a lawyer who specializes in post-employment contracts or employment law before proceeding with any legal action or separations. If you are asked to sign a non-compete agreement, it is important to carefully review the terms of the agreement before signing it, as the agreement can be enforceable and will prevent you from seeking other opportunities when you leave your employer. Our labor law firm in Birmingham, Alabama, has reviewed a number of employment contracts throughout the state of Alabama. If you have problems with a non-compete obligation, contact us at (205) 588-0699 for a free consultation to discuss your situation. Although the legal regime of “presumed reasonable time” is not uncommon elsewhere, [xxxvii] is new in Alabama.
(Before the law was amended, two-year time limits for employment contracts [xxxviii] and longer periods for the sale of commercial agreements [xxxix] were often applied.) The choice of deadlines by the legislator is strange. Employee restrictive covenants have a longer, presumably reasonable, period of time than business sales agreements; In practice, the sale of trade agreements is usually much longer and usually involves many more considerations that come back to the promiser. The law also provides for a likely longer period for employee bans than for customer poaching bans, although previous agreements are by definition more restrictive and binding on the employee. So far, neither the legal deadlines nor the quantity or quality of evidence that might be needed to overcome the presumptions have been taken into account. .