Alabama’s Governor, Kay Ivey, recently signed the Alabama Non-Disparagement Obligations Act. The AL NDO Act is the first law of its kind in the nation, providing the default standards for parties who execute agreements containing non-disparagement provisions and seek to enforce those obligations in court. Given the broad application of the AL NDO Act, which will apply unless the parties explicitly opt out of its reach, Alabama employers and other businesses who enter into covered agreements should be aware of its reach and limitations.
The AL NDO Act applies to a broad range of agreements that contain non-disparagement obligations, including contracts with employees, business relationship termination agreements, and settlement agreements arising out of any type of litigation. The Act provides a cause of action based upon a “disparaging statement,” which the Act defines expansively to include both spoken and written words, whether delivered publicly or privately in one’s own name, anonymously, or through use of a pseudonym. Such a statement would support a claim under the AL NDO Act under a number of scenarios, including where it:
To support a cause of action under the AL NDO Act, the following elements must exist:
The AL NDO Act provides four affirmative defenses to a claim brought under it:
Enforceability of an NDO provision requires that the parties’ agreement carve out certain conduct which, when undertaken in good faith, is intended to accomplish the following purposes:
If a party prevails in an action based upon the violation of the Act, the court may award actual damages and injunctive relief. Additionally, if provided for in the contract, the court may award liquidated damages and/or reasonable attorney’s fees and costs.
It is important to emphasize that unless the parties’ agreement contains a non-disparagement provision, the AL NDO Act has no effect. The statute was not intended to create a cause of action where the parties did not contemplate imposing non-disparagement obligations, and contracting parties are empowered to make the statute inapplicable provided they do so via disclaimer that “expressly and plainly” states that the parties are knowingly waiving the statute’s protections.
Because the AL NDO Act only applies to contracts covered contracts executed after January 1, 2022, Alabama employers and other businesses have a few months to have any questions answered and, if necessary, make adjustments to language in contracts that will be executed after that effective date. If you have any questions about the AL NDO Act or any other matter related to non-disparagement agreements, restrictive covenants, or other employment matters, feel free to contact a member of Waller’s Labor & Employment practice group or Litigation & Dispute Resolution practice group.
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