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Can I require employees to sign non-compete agreements in Alabama? What are the requirements?

Here is the response to your query:

Non-compete agreements in Alabama

Alabama allows employers to require employees to sign non-compete agreements, but there are certain requirements that must be met for such agreements to be enforceable.

According to [1.1]" >ALCA 8-1-1, a covered contract containing a non-disparagement obligation in writing requires the parties to the covered contract to file under seal all initial and responsive pleadings and motions, including, but not limited to, motions under Alabama Rule of Civil Procedure 65 seeking enforcement of a covered contract. This means that non-compete agreements must be in writing and included in a covered contract.

Additionally, non-compete agreements must be reasonable in scope and duration. According to [2.1]" >ALCA 25-14-9, a professional employer organization arrangement shall have a written contract between the client and the professional employer organization recognizing the rights, responsibilities, and duties of each party. The contract shall disclose to the client the services to be rendered by the professional employer organization, including the total administrative fees charged for professional employer organization services, the respective rights and obligations of the parties, and shall provide that the professional employer organization reserves a right of direction and control over contract employees and exercises that right in the context of the need to do so according to the terms and conditions of the professional employment agreement. The client, however, as an employer, may retain sufficient direction and control over covered employees necessary to conduct its business, and, without which, the client would be unable to conduct its business, discharge any fiduciary responsibility, or comply with any applicable licensure, regulatory, or statutory requirement.

This means that non-compete agreements must be limited to the extent necessary to protect the employer’s legitimate business interests, such as trade secrets or confidential information, and cannot be overly broad or restrictive.

Non-disparagement obligations

According to [1.2]" >ALCA 8-1-222, non-disparagement obligations in covered contracts, whether unilateral, bilateral, or multilateral, shall be valid and enforceable for any period of time agreed to by the parties. Non-disparagement obligations in covered contracts are enforceable by a civil action where all of the following elements are present: (1) The covered contract contains language prohibiting one or more of the parties from disparaging one or more of the other parties, and may include specifically named individuals who are affiliated with, are employed by, or are owners of one or more of the parties. (2) A disparaging statement is made by the person or party who is obligated not to make such statements. (3) Either of the following occur: a. The communication of the disparaging statement proximately results in identifiable damage to the plaintiff. b. The terms of the covered contract automatically activate a liquidated damages provision, as defined in Section 8-1-221.

Conclusion

In summary, employers in Alabama can require employees to sign non-compete agreements, but such agreements must be in writing, included in a covered contract, and reasonable in scope and duration. Non-compete agreements must be limited to the extent necessary to protect the employer’s legitimate business interests. Non-disparagement obligations in covered contracts are also enforceable.

Please note that this is not legal advice and you should consult with a licensed attorney for specific guidance on non-compete agreements in Alabama.

[1.1]" >ALCA 8-1-1 [2.1]" >ALCA 25-14-9 [1.2]" >ALCA 8-1-222

Source(s):
Jurisdiction

Alabama