Signing an employment contract means that you establish a business relationship with your employer. In some cases, the contract can also include provisions establishing your lack of a business relationship with parties other than your employer. These provisions are known as non-compete clauses, and as one might imagine, they leave the parties vulnerable to costly disputes unless they are carefully researched and written. United States law encourages business competition and aims to prevent monopolies, so in this regard, it may come as a surprise that non-compete clauses are even an option. Alabama case law includes plenty of rulings in which courts refused to enforce non-compete clauses on the grounds that these clauses were excessively restrictive and placed an unfair burden on the former employee. If you have signed a non-compete agreement, or if your employer wants you to sign one, contact the Alabama non-compete agreement lawyers at HKM Employment Attorneys LLP.
What are Non-Compete Agreements?
A non-compete agreement is one in which one or both parties promise not to engage in certain business activities for a set period of time, so as not to cause the other party economic harm. The purpose of a non-compete agreement is to prevent former business partners from setting up rival businesses in the same geographic area or to prevent a former employee from becoming a direct competitor to their former employer. They are similar in spirit to non-disclosure agreements, in which an employee promises not to share commercially useful information they learned at their previous job with their new employer, effectively protecting the former employer’s trade secrets.
What Kinds of Non-Compete Agreements Does Alabama Law Recognize?
In general, Alabama law favors the right of individuals and companies to engage in commercial activities with few or no restrictions beyond those indicated by federal and state law; the prevailing sentiment is against non-compete agreements. The current version of Alabama non-compete law went into effect in 2016. Section 8-1-1 of Alabama law identifies three types of non-compete agreements which businesses and employees are free to make. The following types of non-compete agreements are permitted under Alabama law:
- Exclusivity clauses – In this type of non-compete clause, the employee promises not to work for any of the employer’s competitors while employed with the employer. For example, an employment contract for a tutor with a college entrance test prep company may include an exclusivity clause saying that the tutor may not work for any other test prep companies during the contract period and while employed by the employer. Once the contract period ends, the tutor is free to get a new job.
- Non-solicitation clauses – These non-compete clauses specifically allow a former employee to work for the employer’s competitor after the end of the employment relationship with the competitor, but they require the employee not to “steal clients” from the former employer. Under Alabama law, non-solicitation clauses are only valid for 18 months starting from the time the employment relationship between the parties ends.
- Dissolution agreements – This type of non-compete agreement is specific to former business partners and does not apply to employer-employee relationships. The parties usually sign this type of agreement upon dissolving their business partnership; they agree not to compete with each other in their next business ventures. The best dissolution agreements specify geographic limits and time limits; for example, they might agree not to both open barbecue restaurants in the same county within a year of dissolving the partnership.
Protecting Trade Secrets or Limiting Free Speech?
The law acknowledges that it is unfair to forbid someone to practice their occupation simply because they have stopped working for a former employer. Would anyone invest the time and money to go to medical school if employers had the right to stop them from ever practicing medicine again if they dared to quit their jobs? Of course, the law does not allow non-compete agreements to be this restrictive. It is a given that workers bring their job skills with them from one position of employment to the next; this is the definition of a career, and non-compete agreements cannot prevent them from doing so.
Rather, non-compete agreements seek to protect trade secrets and proprietary information. Some disputes over non-compete agreements have hinged on whether the information that the former employer did not want the former employee to share with future employers was truly proprietary, meaning that the former employer would be harmed if the former employee shared it. When it is clear that a body of information, gathered through the employer’s efforts, must only be shared in-house in order to be commercially beneficial, the employer should seek a trademark for it. The classic example is proprietary recipes used by restaurants, such as the 11 secret herbs and spices in KFC chicken.
How to Resolve Disputes Over Non-Compete Agreements
The best way to avoid disputes over non-compete agreements is not to sign these agreements unless you are sure that the benefits of signing the agreement outweigh the costs. You should review the agreement with the Alabama employment lawyers at HKM Employment Attorneys LLP before you sign. In some industries, non-compete agreements are standard, so it would not be practical to ask your employer to hire you without the agreement.
If you signed a non-compete agreement upon beginning or ending a job, and now your former employer is accusing you of violating the terms of the agreement, you should also contact an employment lawyer. If the agreement is not enforceable, your lawyer may be able to persuade your former employer of this even without all the stress and expense of litigation. Likewise, your lawyer may be able to persuade your former employer that your actions do not violate the terms of the agreement.
Contact an Alabama Non-Compete Agreement Lawyer
Non-compete agreements are a conflict-prone area of employment law, but an Alabama employment lawyer can help you navigate these agreements and resolve disputes that arise from them. Contact the Alabama employment contract lawyers at HKM Employment Attorneys LLP to set up a consultation.
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