Are employee non-compete agreements enforceable in Alabama?
Alabama enforces an employee non-compete only when it fits an exception listed in Ala. Code § 8-1-190, because that section voids every other contract restraining a lawful profession, trade, or business . Under the employee exception, a restraint of two years or less is presumed reasonable .
Alabama is not a reasonableness state in the usual sense. Restrictive covenants are now governed by the Alabama Restrictive Covenant Act, Ala. Code § 8-1-190 et seq. (enacted as Act 2015-465, effective in 2016), which replaced the older, common-law-driven § 8-1-1. The Act governs covenants entered on or after its effective date; agreements predating it remain governed by the former § 8-1-1, which is why several leading Alabama cases construe that predecessor statute. The Act begins with a presumption of voidness.
An employee non-compete escapes that rule only if it fits the employee exception in § 8-1-190(b)(4), which requires a specified geographic area and a competing business by the employer, and which builds in a durational presumption . Fitting a statutory category is necessary but not sufficient: the covenant still has to protect a statutory protectable interest, satisfy the writing-and-signature and consideration rules, and survive the professional exemption and any other defense. So the practical question in Alabama is rarely whether a covenant is generally reasonable; it is whether the covenant fits a statutory category and clears those additional limits.
Alabama voids every restraint by default and enforces only a covenant that fits one of the six exceptions in Ala. Code § 8-1-190(b), so a covenant that fits no listed category, or that reaches only the employee's general job skills rather than a listed interest, is void no matter how carefully it is drafted . The employee non-compete, the current-customer non-solicit, and the uniquely-essential no-hire each have a named category, but a non-dealing or non-investment restraint has none of its own: it holds only where it is confined to fit inside a listed exception, and a version that reaches past that boundary is exposed to the § 8-1-190(a) void rule rather than to mere narrowing .
Sources for this answer
Ala. Code § 8-1-190(a) supports the rule that every contract restraining a lawful profession, trade, or business is void except as the section otherwise allows.
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.
See Ala. Code § 8-1-190(a).
Ala. Code § 8-1-190(b)(4) supports that an employee may agree to a geographically limited non-compete and that restraints of two years or less are presumed reasonable.
Restraints of two years or less are presumed to be reasonable.
See Ala. Code § 8-1-190(b)(4).
Which restrictive covenants does the Alabama Restrictive Covenant Act allow?
The Alabama Restrictive Covenant Act's list of allowed restrictive covenants in Ala. Code § 8-1-190(b) includes a no-hire covenant for uniquely essential employees and a seller's covenant not to compete with the buyer of a business's goodwill. On a touch screen, a tap shows all 2 sources in this group. Section 8-1-190(b) also allows exclusive-dealing agreements, employee non-competes, current-customer non-solicitation covenants, and covenants among partners, owners, or members on a dissolution. On a touch screen, a tap shows all 4 sources in this group. A sale-of-business restraint of one year or less is presumed reasonable, as is a non-solicitation restraint of eighteen months or for as long as post-separation consideration is paid, whichever is greater. On a touch screen, a tap shows all 2 sources in this group.
The exceptions are listed in § 8-1-190(b). They are the entire universe of allowed restraints; anything that does not fit one of the six is void. The employee-facing categories carry the most-cited duration presumptions.
For a covenant by a seller of a business's goodwill, a restraint of one year or less is presumed reasonable. On a touch screen, a tap shows all 2 sources in this group. The customer non-solicitation exception reaches only current customers, not former or merely prospective ones, and for such a covenant the presumed-reasonable period is eighteen months or as long as post-separation consideration is paid, whichever is greater.
The employee no-hire category is unusually narrow. A covenant restricting the hiring of another party's workers is allowed only where the worker holds a position uniquely essential to the business , a high bar that few rank-and-file or mid-level employees will meet.
A covenant restricting the hire or employment of another party's workers fits Ala. Code § 8-1-190(b)(1) only where the worker holds a position uniquely essential to the management, organization, or service of the business — a high bar few rank-and-file or mid-level employees meet . A workforce-wide no-hire or no-poach clause fits no § 8-1-190(b) category, so it is exposed to being voided in its entirety rather than narrowed, and a covenant confined to the uniquely-essential class at the outset is the one that survives.
Sources for this answer
Ala. Code § 8-1-190(b)(3) supports that a sale-of-business covenant restraint of one year or less is presumed reasonable.
Restraints of one year or less are presumed to be reasonable.
See Ala. Code § 8-1-190(b)(3).
Ala. Code § 8-1-190(b)(3) permits one who sells the goodwill of a business to agree not to compete or solicit customers within a specified area while the buyer carries on a like business there, subject to reasonable time and place restraints.
One who sells the good will of a business may agree with the buyer to refrain from carrying on or engaging in a similar business and from soliciting customers of such business within a specified geographic area so long as the buyer, or any entity deriving title to the good will from that business, carries on a like business therein, subject to reasonable time and place restraints.
See Ala. Code § 8-1-190(b)(3).
Ala. Code § 8-1-190(b)(5) supports the current-customer non-solicitation exception and its eighteen-month (or paid-consideration) presumption of reasonableness.
Restraints of 18 months or for as long as post-separation consideration is paid for such agreement, whichever is greater, are presumed to be reasonable.
See Ala. Code § 8-1-190(b)(5).
Ala. Code § 8-1-190(b)(1) supports that an employee no-hire covenant is allowed only where the worker holds a position uniquely essential to the business.
A contract between two or more persons or businesses or a person and a business limiting their ability to hire or employ the agent, servant, or employees of a party to the contract where the agent, servant, or employee holds a position uniquely essential to the management, organization, or service of the business.
See Ala. Code § 8-1-190(b)(1).
Ala. Code § 8-1-190(b)(2) allows an agreement between persons or businesses to limit commercial dealings to each other.
An agreement between two or more persons or businesses or a person and a business to limit commercial dealings to each other.
See Ala. Code § 8-1-190(b)(2).
Ala. Code § 8-1-190(b)(4) allows an employee to agree not to carry on a similar business within a specified geographic area while the employer carries on a like business there, subject to reasonable time and place restraints.
An agent, servant, or employee of a commercial entity may agree with such entity to refrain from carrying on or engaging in a similar business within a specified geographic area so long as the commercial entity carries on a like business therein, subject to reasonable restraints of time and place.
See Ala. Code § 8-1-190(b)(4).
Ala. Code § 8-1-190(b)(5) allows an employee to agree not to solicit the employer's current customers while the employer carries on a like business, subject to reasonable time restraints.
An agent, servant, or employee of a commercial entity may agree with such entity to refrain from soliciting current customers, so long as the commercial entity carries on a like business, subject to reasonable time restraints.
See Ala. Code § 8-1-190(b)(5).
Ala. Code § 8-1-190(b)(6) allows partners, owners, or members, upon or in anticipation of a commercial entity's dissolution, to agree not to carry on a similar commercial activity in the area where it was transacted.
Upon or in anticipation of a dissolution of a commercial entity, partners, owners, or members, or any combination thereof, may agree that none of them will carry on a similar commercial activity in the geographic area where the commercial activity has been transacted.
See Ala. Code § 8-1-190(b)(6).
What is a protectable interest under Alabama law?
Under Ala. Code § 8-1-191, a protectable interest is one of the interests the statute lists, such as commercial relationships with specific prospective or existing customers, and job skills by themselves are not a protectable interest. On a touch screen, a tap shows all 2 sources in this group. The statute's list also includes specialized and unique training involving substantial business expenditure directed to the particular worker, provided the training is specifically set forth in writing as the consideration for the restraint .
Fitting a statutory exception is not enough; the party enforcing the covenant must also show it protects a protectable interest defined in § 8-1-191. The list includes trade secrets, which are defined by cross-reference to the Alabama Trade Secrets Act at Ala. Code § 8-27-2, along with confidential information, goodwill, and commercial relationships with specific customers, including prospective ones .
The statute draws a hard line at general skills. An employer cannot restrain a former employee just to suppress competition.
“Job skills in and of themselves, without more, are not protectable interests.”
Specialized training counts, but only if the employer takes a specific drafting step: the training and its expense must be set out in writing in the agreement itself as consideration for the restraint .
Specialized training supports an Alabama covenant only on a specific drafting condition. Section 8-1-191 makes specialized training a protectable interest only when the training and its anticipated expense are specifically set forth in writing in the agreement as consideration for the restraint, so a covenant resting on a generic or boilerplate training recital protects no listed interest and fails on that element .
Sources for this answer
Ala. Code § 8-1-191(a)(3) supports that commercial relationships with specific prospective or existing customers are a protectable interest.
Commercial relationships or contacts with specific prospective or existing customers, patients, vendors, or clients.
See Ala. Code § 8-1-191(a)(3).
Ala. Code § 8-1-191(b) supports that job skills by themselves are not a protectable interest.
Job skills in and of themselves, without more, are not protectable interests.
See Ala. Code § 8-1-191(b).
Ala. Code § 8-1-191(a)(5) supports that specialized training is a protectable interest only when the training is specifically set forth in writing as the consideration for the restraint.
Specialized and unique training involving substantial business expenditure specifically directed to a particular agent, servant, or employee; provided that such training is specifically set forth in writing as the consideration for the restraint.
See Ala. Code § 8-1-191(a)(5).
Must an Alabama non-compete be signed by all parties, including the employer?
An Alabama non-compete must be signed by all parties, including the employer, because Ala. Code § 8-1-192 makes a covenant valid only if it is in writing, signed by all parties, and supported by adequate consideration . In Amanda Howard Real Estate v. Lee, the Alabama Supreme Court affirmed a judgment against an employer that could not establish it had satisfied that signatures requirement .
Section 8-1-192 sets three formation requirements for any covenant under the Act.
In Amanda Howard Real Estate, LLC v. Lee, the employee signed the addendum containing the non-compete in 2017, but no representative of the employer signed that document at the time; the employer did not sign it until the day the employee resigned, roughly two years later, after the employment contract had already been formed. The trial court held the covenant void, and the Supreme Court affirmed, reading the signed-by-all-parties requirement strictly.
The Court rejected the employer's arguments that mutual assent shown by conduct, or full performance of the employment relationship, could substitute for the missing signature . The signature has to be on the document that actually contains the restrictive covenant.
An Alabama covenant stands only where the company itself signs the exact document that contains the non-compete while the employment relationship is in place. After Amanda Howard Real Estate v. Lee, an employer's failure to timely sign the covenant document leaves that covenant void, and a much-later signature, payment, or assent shown by conduct does not cure it; a fresh covenant going forward is enforceable only where it independently satisfies § 8-1-192. On a touch screen, a tap shows all 2 sources in this group.
Sources for this answer
Ala. Code § 8-1-192 supports that a covenant must be in writing, signed by all parties, and supported by adequate consideration to be valid.
In order to be valid, any contract or agreement executed pursuant to this article shall be reduced to writing, signed by all parties, and be supported by adequate consideration.
See Ala. Code § 8-1-192.
Amanda Howard Real Estate v. Lee supports that a covenant is void where the employer did not satisfy the statutory all-parties signature requirement of § 8-1-192.
We affirm the judgment because none of Howard Real Estate's arguments establish that it satisfied the statutory signatures requirement.
See Amanda Howard Real Estate, LLC v. Lee, 387 So. 3d 120 (Ala. 2023).
Amanda Howard Real Estate v. Lee supports that the document that must be signed by all parties is the contract or agreement containing the noncompete provision.
Thus, the thing that must be signed by all parties is the "contract or agreement" containing the noncompete provision.
See Amanda Howard Real Estate, LLC v. Lee, 387 So. 3d 120 (Ala. 2023).
When does an Alabama non-compete have to be signed relative to employment?
Under Alabama's predecessor statute, a non-compete signed before employment began was void and stayed void once employment started, as the Alabama Supreme Court held in Pitney Bowes v. Berney Office Solutions . In our review we found no decision under the 2016 Act addressing the point.
This is a timing trap that predates the 2016 Act but remains a live drafting risk. In Pitney Bowes, Inc. v. Berney Office Solutions, an employee signed a non-compete before the acquiring company became his employer, and the company tried to enforce it after the acquisition closed about a month later. The Court refused.
Pitney Bowes construed the former § 8-1-1, but the employee exceptions in the current Act are written the same relationship-first way: § 8-1-190(b)(4) and (b)(5) allow a covenant by an agent, servant, or employee of a commercial entity with such entity, which presupposes an existing employment relationship at signing. The case also disposes of a common argument that paying for the covenant cures the problem; the Court explained the statute already assumes the covenant is supported by consideration . That is why Alabama treats continued employment of an existing employee as adequate consideration, while a payment cannot rescue a covenant that is void for a different reason.
Do not have a new hire sign an Alabama non-compete before the employment relationship actually begins. Pitney Bowes held that a covenant signed before employment was void and did not become valid when employment later started, so the safer practice is to execute the covenant once the person is employed and to re-execute it after any acquisition that changes the employing entity .
Sources for this answer
Pitney Bowes, construing the former § 8-1-1, supports that a covenant signed before the employer-employee relationship existed is void and is not cured when employment later begins.
The voidness of the agreement in this case did not disappear when Pitney employed Morris almost a month after the signing.
See Pitney Bowes, Inc. v. Berney Office Solutions, 823 So. 2d 659 (Ala. 2001).
Pitney Bowes, construing the former § 8-1-1, supports that the restrictive-covenant statute presupposes a covenant already supported by consideration, so paying for the covenant does not by itself save an otherwise void restraint.
This statute, however, presupposes noncompete agreements supported by consideration.
See Pitney Bowes, Inc. v. Berney Office Solutions, 823 So. 2d 659 (Ala. 2001).
Will an Alabama court narrow an overbroad non-compete instead of voiding it?
An Alabama court may reform a covenant that is overly broad or unreasonable in its duration, but it may void a restraint entirely if the restraint does not fit one of the exceptions in Ala. Code § 8-1-190(b). On a touch screen, a tap shows all 2 sources in this group.
Alabama gives courts a limited blue-pencil power. If the problem is an unreasonable duration, a court can trim the covenant and enforce the rest.
But reformation has a hard limit. A court can fix an overbroad term inside a valid category; it cannot rewrite a covenant that never fit a statutory exception to begin with . For a restraint that is not tethered to a protectable interest, or that falls outside the six categories, the statute authorizes a court to void it in its entirety rather than narrow it. For a clause-by-clause pass over a specific agreement against these rules, the Alabama non-compete reviewer checklist walks the full covenant suite item by item with each requirement's force level.
Alabama's blue-pencil power is not a safety net for an overreaching covenant. Section 8-1-193 lets a court reform an overbroad duration, but it authorizes the court to void the entire restraint where the covenant does not fit one of the six § 8-1-190(b) exceptions, so a covenant that misses a statutory category is exposed to being voided in its entirety rather than salvaged through duration reformation .
Sources for this answer
Ala. Code § 8-1-193 supports that a court may reform a restraint that is overly broad or unreasonable in duration and enforce it in part.
If a contractually specified restraint is overly broad or unreasonable in its duration, a court may void the restraint in part and reform it to preserve the protectable interest or interests.
See Ala. Code § 8-1-193.
Ala. Code § 8-1-193 supports that a restraint that does not fall within the § 8-1-190(b) exceptions may be voided in its entirety.
If a contractually specified restraint does not fall within the limited exceptions set out in subsection (b) of Section 8-1-190, a court may void the restraint in its entirety.
See Ala. Code § 8-1-193.
Does Alabama exempt professionals from non-compete agreements?
Alabama law exempts a member of a recognized profession from a non-compete that bars the practice of that profession, an exemption that Ala. Code § 8-1-196 preserves under the 2016 Act. On a touch screen, a tap shows all 2 sources in this group. Courts have applied the exemption to physical therapists, and it protects only the practice of the profession, not unrelated business conduct .
The 2016 Act did not disturb the long-standing rule that professionals are off-limits for non-competes. Section 8-1-196 expressly keeps that exemption in place.
Alabama courts decide who is a professional using a multi-factor test drawn from cases under the former § 8-1-1, which § 8-1-196 carries forward. In Friddle v. Raymond, the Court listed the factors that distinguish a profession from an ordinary trade.
A professional cannot squeeze into the statutory exceptions, so a covenant that bars practicing the profession fails . Alabama courts have classified physicians, certified public accountants, and veterinarians as professionals, and in Benchmark Medical Holdings, Inc. v. Barnes a federal court applying Alabama law extended the exemption to physical therapists .
The exemption is not blanket immunity, though. It protects the professional in the practice of the profession, not in every business activity.
So a professional cannot be barred from practicing, but conduct outside that practice — Benchmark used the example of acquiring competing practices purely as an investment, without managing them — can still be restrained.
A member of a recognized Alabama profession cannot be barred from practicing that profession, even by a covenant that would otherwise fit a § 8-1-190(b) category: § 8-1-196 preserves the common-law professional exemption, and a professional cannot fall within the statutory exceptions at all, so a covenant restraining professional practice is void on that ground. On a touch screen, a tap shows all 2 sources in this group. The exemption reaches only the practice of the profession, so a restraint on business conduct outside that practice — Benchmark's example of acquiring competing practices purely as an investment without managing them — can still operate, and the confidentiality, trade-secret, and property-return obligations survive to the extent they do not bar the practice itself .
Sources for this answer
Ala. Code § 8-1-196 supports that the Act does not eliminate any professional exemption recognized by Alabama law.
Nothing in this article shall be construed to eliminate any professional exemption recognized by Alabama law.
See Ala. Code § 8-1-196.
Friddle v. Raymond, construing the former § 8-1-1, supports the factors Alabama courts use to decide whether an occupation is a profession: required training and skill, the delicate nature of the services, and the need to make instantaneous decisions.
this Court stated several relevant factors to be considered in resolving the issue as to what constitutes a profession: professional training, skill, and experience required to perform certain services; delicate nature of the services offered; and the ability and need to make instantaneous decisions.
See Friddle v. Raymond, 575 So. 2d 1038 (Ala. 1991).
Friddle v. Raymond, construing the former § 8-1-1, supports that a professional cannot fall within the statutory exceptions, so a covenant not to compete against a professional is unenforceable.
this Court has stated on numerous occasions that a "professional" cannot fall within these statutory exceptions.
See Friddle v. Raymond, 575 So. 2d 1038 (Ala. 1991).
Benchmark Medical Holdings v. Barnes, construing the former § 8-1-1, supports that a physical therapist is a professional and therefore is not subject to a non-compete that bars the practice of the profession under Alabama law.
Because a physical therapist as a professional cannot fall within either of these statutory exceptions, the general rule that non-compete agreements are invalid applies; therefore, physical therapists are not subject to non-competition agreements.
See Benchmark Med. Holdings, Inc. v. Barnes, 328 F. Supp. 2d 1236 (M.D. Ala. 2004).
Benchmark Medical Holdings v. Barnes, construing the former § 8-1-1, supports that the professional exemption protects the professional only in the practice of the profession, not in unrelated business conduct.
A doctor is, instead, protected only in his practice of medicine, for the purpose of the protection is the interest of the public in being able to receive the doctor's professional services.
See Benchmark Med. Holdings, Inc. v. Barnes, 328 F. Supp. 2d 1236 (M.D. Ala. 2004).
Does a tolling or extension-during-breach clause extend an Alabama non-compete?
In our review we found no Alabama decision under the 2016 Act deciding whether a clause that pauses or extends a non-compete's restricted period during breach or litigation is enforceable. A tolling clause that pushes the effective restraint past the two-year presumptively reasonable window is exposed to reformation as an unreasonable duration. On a touch screen, a tap shows all 2 sources in this group.
Many non-compete forms add a tolling or extension clause so the employer gets the full restricted period even if the former employee competes during it. Alabama has no statute or controlling case on whether such a clause is enforceable, so this is an open question that calls for caution rather than confidence.
The statutory text is the best available guide. The employee exception presumes a restraint of two years or less to be reasonable.
“Restraints of two years or less are presumed to be reasonable.”
A tolling clause that adds the period of breach plus the time spent in litigation can stretch the effective restraint well beyond two years. Section 8-1-193 lets a court reform a restraint that is overly broad or unreasonable in its duration , which is the mechanism a court would likely use to cut an open-ended extension back to a reasonable fixed term. Because no Alabama court has ruled on the point, an employer should not assume a drafted tolling clause will add lost time back to the period.
Treat an open-ended tolling-during-breach clause in an Alabama non-compete as unsettled and risky. No Alabama decision enforces one, the statute presumes only restraints of two years or less reasonable, and § 8-1-193 gives a court power to reform an unreasonable duration, so a defined, reasonable fixed term is the safer choice. On a touch screen, a tap shows all 2 sources in this group.
Sources for this answer
Ala. Code § 8-1-190(b)(4) supports that only restraints of two years or less are presumed reasonable, which bears on a tolling clause that extends the effective period.
Restraints of two years or less are presumed to be reasonable.
See Ala. Code § 8-1-190(b)(4).
Ala. Code § 8-1-193 supports that a court may reform a restraint that is overly broad or unreasonable in its duration.
If a contractually specified restraint is overly broad or unreasonable in its duration, a court may void the restraint in part and reform it to preserve the protectable interest or interests.
See Ala. Code § 8-1-193.
Who has the burden of proof, and what remedies are available in Alabama?
The party seeking to enforce an Alabama non-compete bears the burden of proof on every element under Ala. Code § 8-1-194, and § 8-1-195 makes contract remedies available, including attorneys' fees or costs where the contract provides for them. On a touch screen, a tap shows all 2 sources in this group. The party resisting enforcement bears the burden of proving undue hardship if it raises that defense .
The Act allocates the burden of proof against the covenant. The employer must establish each element of enforceability.
“The party seeking enforcement of the covenant has the burden of proof on every element.”
The employee or other restrained party carries the burden only on undue hardship, and only if it chooses to raise that defense. On remedies, § 8-1-195 makes injunctive relief, actual or liquidated damages, and ordinary contract remedies available, including attorneys' fees where the contract or law provides for them . The Act also preserves any other defense available in law or equity .
Sources for this answer
Ala. Code § 8-1-194 supports that the party seeking enforcement bears the burden of proof on every element.
The party seeking enforcement of the covenant has the burden of proof on every element.
See Ala. Code § 8-1-194.
Ala. Code § 8-1-195(a) supports that contract remedies, including attorneys' fees or costs where provided, are available for breach of a covenant under the Act.
Any remedies available in contract law, including attorneys’ fees or costs, if provided for in the contract or otherwise provided for by law.
See Ala. Code § 8-1-195(a)(3).
Ala. Code § 8-1-195(b) supports that the Act does not limit any defense otherwise available in law or equity.
Nothing in this article shall limit the availability of any defense otherwise available in law or equity.
See Ala. Code § 8-1-195(b).
Ala. Code § 8-1-194 puts the burden of proving undue hardship, when raised as a defense, on the party resisting enforcement.
The party resisting enforcement of the covenant has the burden of proving the existence of undue hardship, if raised as a defense.
See Ala. Code § 8-1-194.
Can an out-of-state choice-of-law clause bypass Alabama non-compete law?
An out-of-state choice-of-law clause cannot bypass Alabama's Restrictive Covenant Act when the chosen law would violate a fundamental public policy the Act expresses, because Ala. Code § 8-1-197 directs that the Act then governs instead. On a touch screen, a tap shows all 2 sources in this group.
Multi-state employers often designate a more permissive state's law to escape Alabama's professional exemption or its other limits. The Act anticipates that move. It first declares its own status.
It then tells courts to apply Alabama law over a conflicting foreign law.
Because the legislature labeled its restrictive-covenant rules fundamental public policy, an Alabama court, or a federal court applying Alabama conflicts rules, can disregard a foreign choice-of-law clause that would enforce a covenant Alabama treats as void.
Do not count on a Delaware, Florida, or other foreign choice-of-law clause to make an otherwise void Alabama covenant enforceable. Section 8-1-197 designates the Act as fundamental public policy and directs courts to apply Alabama law instead of a conflicting foreign law, so a choice-of-law workaround is unreliable for covenants Alabama would void .
Sources for this answer
Ala. Code § 8-1-197 supports that the Act expresses fundamental public policies of the State of Alabama.
It is hereby declared that this article expresses fundamental public policies of the State of Alabama.
See Ala. Code § 8-1-197.
Ala. Code § 8-1-197 supports that the Act governs instead of a foreign law whose application would violate the fundamental public policy the Act expresses.
Therefore, this article shall govern and shall be applied instead of any foreign laws that might otherwise be applicable in those instances when the application of those foreign laws would violate a fundamental public policy expressed in this article.
See Ala. Code § 8-1-197.
What does federal law require a non-compete or confidentiality agreement in Alabama to say about whistleblowers and pay?
An employee confidentiality, non-compete, or invention assignment agreement signed or updated now that governs trade secrets or other confidential information must give the Defend Trade Secrets Act whistleblower-immunity notice, and for employees the National Labor Relations Act covers, Section 7 of that Act protects concerted activity, including joining together over pay and working conditions, that a broad confidentiality clause can restrict. The employer may satisfy the notice duty by cross-referencing a qualifying policy document provided to the employee, but an employer that omits the notice may not be awarded exemplary damages or attorney fees under the Defend Trade Secrets Act in an action against an employee who was not given notice.
The notice describes a federal immunity: an individual cannot be held liable under federal or state trade-secret law for disclosing a trade secret in confidence to a government official or an attorney solely to report or investigate a suspected violation of law, or in a court filing made under seal. For an agreement signed or updated now, the duty to give that notice reaches any agreement with an employee that governs trade secrets or other confidential information, whatever else the agreement does.
Section 7 gives employees the National Labor Relations Act covers a statutory right to engage in concerted activity for mutual aid or protection, including joining together to improve pay and working conditions. For employees the Act covers, the Board's work-rule standard adopted in 2023 makes a rule presumptively unlawful if it has a reasonable tendency to chill employees from exercising their Section 7 rights; an employer can rebut that presumption only by showing a legitimate and substantial business interest it cannot serve with a more narrowly tailored rule. The 2023 standard may change, but the Section 7 right it enforces is statutory. State law may add its own requirements for the same clauses.
A form carried over without the immunity notice, or a cross-reference to a reporting policy the employee never received, leaves the confidentiality clause without a valid notice, so the Act's exemplary damages and attorney fees are unavailable against that employee. A Confidential Information definition that sweeps in pay and working conditions with no carve-out exposes the employer to an unfair-labor-practice finding for employees the Act covers.
Sources for this answer
An individual is immune from criminal and civil liability under federal and state trade-secret law for disclosing a trade secret in confidence to a government official or an attorney solely to report or investigate a suspected violation of law, or in a court filing made under seal.
An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that— (A) is made— (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
See 18 U.S.C. § 1833(b)(1).
An employer must give notice of the trade-secret whistleblower immunity in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.
An employer shall provide notice of the immunity set forth in this subsection in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.
See 18 U.S.C. § 1833(b)(3)(A).
An employer complies with the notice requirement by cross-referencing a policy document, provided to the employee, that sets out the employer's reporting policy for a suspected violation of law.
An employer shall be considered to be in compliance with the notice requirement in subparagraph (A) if the employer provides a cross-reference to a policy document provided to the employee that sets forth the employer's reporting policy for a suspected violation of law.
See 18 U.S.C. § 1833(b)(3)(B).
An employer that does not give the required notice may not be awarded exemplary damages or attorney fees in a trade-secret action against an employee who did not receive it.
If an employer does not comply with the notice requirement in subparagraph (A), the employer may not be awarded exemplary damages or attorney fees under subparagraph (C) or (D) of section 1836(b)(3) in an action against an employee to whom notice was not provided.
See 18 U.S.C. § 1833(b)(3)(C).
Section 7 gives employees the right to engage in concerted activities for mutual aid or protection, the statutory basis for keeping discussion of pay and working conditions outside confidentiality restrictions.
Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all of such activities except to the extent that such right may be affected by an agreement requiring membership in a labor organization as a condition of employment as authorized in section 158(a)(3) of this title.
See 29 U.S.C. § 157 (NLRA § 7).
The National Labor Relations Board protects the right of private-sector employees, with or without a union, to join together to improve wages, benefits, and working conditions.
Established in 1935, the National Labor Relations Board is an independent federal agency that protects employees from unfair labor practices and protects the right of private sector employees to join together, with or without a union, to improve wages, benefits and working conditions.
See NLRB Office of Public Affairs, news release of Feb. 21, 2023 (agency mission statement).
Under the work-rule standard the Board adopted in 2023, a rule with a reasonable tendency to chill employees from exercising their Section 7 rights is presumptively unlawful unless the employer proves a legitimate and substantial business interest it cannot advance with a more narrowly tailored rule.
Under the new standard adopted in Stericycle, the General Counsel must prove that a challenged rule has a reasonable tendency to chill employees from exercising their rights. If the General Counsel does so, then the rule is presumptively unlawful. However, the employer may rebut the presumption by proving that the rule advances a legitimate and substantial business interest and that the employer is unable to advance that interest with a more narrowly tailored rule.
See Stericycle, Inc., 372 NLRB No. 113 (2023); NLRB Office of Public Affairs, Board Adopts New Standard for Assessing Lawfulness of Work Rules (Aug. 2, 2023).