Burr Alert: Alabama's New Non-Compete Statute: Are You Ready For New Year's Day?
Those involved in drafting, negotiating, or litigating covenants-not-to-compete in Alabama have long known that Alabama's statute books seldom provide ready answers on this particular topic. The text of current Alabama Code § 8-1-1, entitled "Contracts restraining business void; exceptions," was -- until this year -- last amended in 1940. This text consists of three short paragraphs and does not delve into details. As a practical matter, this has meant that, for the past 75 years, it has been up to Alabama courts to fill in the details.
This is about to change. On June 11, 2015, Governor Bentley signed into law House Bill No. 352, entitled "Contracts, use of restrictive covenants clarified, Sec. 8-1-1 repealed." The new law comes into effect on January 1, 2016 and repeals all of current Alabama Code § 8-1-1.
At least in some respects, the provisions of the new law mirror what Alabama courts have already been doing. This codification of previous court outcomes into Alabama's statute books should help to provide clarity when drafting, negotiating, and litigating future agreements. In other respects, though, the new statute innovates. As a result, employers will want to pay close attention to the new law and make sure that their existing agreements comply with the law.
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