May 21, 2022

Volume XII, Number 141

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May 20, 2022

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May 19, 2022

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A Dash of Certainty – Alabama’s New Restrictive Covenant Statute

Alabama has a new restrictive covenant statute.  A few weeks ago, Alabama Governor Bentley signed new legislation which will repeal the 1975 version of Alabama Code Section 8-1-1 titled “Contracts restraining business void; exceptions” and replace it with a new version effective January 1, 2016.

The new law stakes out the permissible scope and purpose of restrictive covenants such as non-compete and non-solicitation agreements.  Unlike some other states with restrictive covenant statutes, Alabama’s new law codifies a middle-of-the-road approach to restrictive covenants.  Essentially, it allows non-compete and non-solicitation clauses for many employees provided they contain reasonable restrictions.  In explaining what may constitute reasonable restrictions, the new law provides a dash of certainty in an especially uncertain area of law.  First, it explains that restrictive covenants must be limited to the geographic area where the company operates a similar business.  Second, it also provides certainty about the appropriate temporal limitations.  It says that a temporal restriction of 2 years or less in a run-of-the-mill employee/employer non-compete is presumptively reasonable.  It also says that a temporal restriction of 18 months or less (or for as long as post-separation consideration is paid for that agreement; whichever is longer) in a non-solicitation of customers clause is presumptively reasonable.  Finally, the statute also codifies the concept of equitable modification (sometimes loosely described as blue-penciling) and permits a court to modify restrictions that are over broad or unreasonably long to preserve the protectable interest at issue.

In light of this new law, employers should consider whether any changes are necessary to their restrictive covenants.  However, because the enforceability of restrictive covenants necessarily depends on the circumstances, employers seeking to modify or implement restrictive covenants should consult with an experienced restrictive covenant attorney to determine how best to craft reasonable restrictions under the circumstances.

 

©2022 Epstein Becker & Green, P.C. All rights reserved.National Law Review, Volume V, Number 189
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About this Author

Peter Altieri, Epstein Becker Law Firm, New York, Labor and Employment LAw Attorney
Member

Peter Altieri is a Member of the Firm at Epstein Becker Green, in the Litigation and Labor and Employment practices. Based in the firm's New York office, where he serves as the Managing Shareholder, he concentrates on complex commercial litigation, antitrust/trade regulation, trade secrets, and employment-related litigation. Mr. Altieri represents clients in myriad industries, including financial services, managed care, trucking, and insurance. Routinely appearing before arbitrators, federal and state courts, and administrative agencies, he has handled mediations,...

212-351-4592
David J. Clark Attorney, Epstein Becker Green, Labor and Employment Law Attorney
Member of The Firm

David J. Clark is a Member of the Firm in the Litigation and Employment, Labor & Workforce Management practices in Epstein Becker Green’s New York office. His practice concentrates on litigating complex commercial and employment-related disputes before state and federal courts and arbitration tribunals. Mr. Clark represents clients in a wide range of industries, including financial services, advertising and media, accounting, banking, insurance, managed care, and retail brands.

212-351-3772
Peter Steinmeyer, Labor Attorney, Epstein Becker Law Firm
Member

PETER A. STEINMEYER is a Member of the Firm in the Labor and Employment practice of Epstein Becker Green and serves as the Chicago office Managing Shareholder. Practicing in all aspects of labor and employment law, he is also Co-Chair of the firm's Non-Competes, Unfair Competition and Trade Secrets Practice Group.

Mr. Steinmeyer advises clients on the enforcement and drafting of non-compete, non-solicitation, and employment agreements, litigates trade secret, non-compete, non-solicitation, raiding, and other restrictive covenant matters in...

312-499-1417
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