If your former employer or business partner wants you to sign a non-compete agreement, obtaining another job in your field may become problematic. It’s crucial to understand exactly what you’re signing and the extent of the limitations. Before signing any such document, it’s wise to hire a business attorney to review the non-compete agreement and ensure your rights. If you’ve already signed such an agreement and find yourself locked out of certain jobs, an experienced business attorney can help you.
Many non-compete contracts are, for practical purposes, not enforceable. Under a state law that went into effect on January 1, 2016, “Every contract by which anyone is restrained from exercising a lawful profession, trade, or business of any kind otherwise than is provided by this section is to that extent void.” However, the law provides exceptions, and these make the new statute more restrictive. These exceptions include:
- Persons holding a position “uniquely essential” to the business. However, the new law does not define exactly what makes an individual uniquely essential.
- The non-compete agreement involves the sale of a business.
- No soliciting for a similar business in the same geographic area for a period of up to one year. In certain circumstances, the area may include the entire state.
- Restraint from contacting the former business’ commercial customers for up to 18 months, or the time specified in the post-separation agreement, whichever is longer.
In any non-compete situation, the burden of proof is on the employer. The employee faced with allegations of violating the non-compete agreement must prove undue hardship. Under the new law, “blue penciling” is still permitted. Blue penciling refers to allowing the court to enforce the reasonable portions of non-compete agreements, while removing the unreasonable portions.
The new law includes “protectable interests,” which may stand up in non-compete agreement disputes. Job skills, per se, are not considered protected under a non-compete agreement. Protectable interests are considered:
- Trade secrets
- Clients and vendors
- Mailing lists
- Strategies and methodology
- Specialized training provided to an employee that involves substantial investment by the former employer.
Non-Compete Contracts and Retroactivity
In the past, some Alabama non-compete agreements involved longer time limits than those provided for in the new law. The new legislation did not make non-compete agreements entered into prior to January 1, 2016 retroactive. Since the new law did not state that prior agreements are treated retroactively, it is unlikely the courts will consider retroactive application.
If you are a former employee or business owner and have questions about a non-compete agreement, you need the services of a skilled business law attorney. If you are an employer and want to ensure your non-compete agreements are enforceable, we can help. Call our law firm today at 205-383-1809. We will review your situation and advise you of your options going forward.