Alabama Non-Compete Agreement Template

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Updated July 28, 2022

An Alabama non-compete agreement is a contract between an employer that prohibits an employee from entering into the same business. A company can require an individual to agree to a non-compete for a period of up to two (2) years and must be specified to a geographical area. Broad or unreasonable agreements are not allowed.

Legally Enforceable?

Yes, a non-compete is legal to preserve a protectable interest in Alabama.

Source: Section 8-1-190

Employees

A non-compete is prohibited from anyone exercising a “lawful profession trade or business.”

There is no definition for the term “lawful profession,” although, the following court cases have decided specific types:

Independent Contractors

An independent contractor that enters into a non-compete is not enforceable in Alabama.

Source: Premier Indus. Corp. v. Marlow (1974)

Sale of a Business

A seller of a business is eligible to be held to a non-compete for a period of up to 1 year. This is conditional upon the buyer continuing the same business after the sale. A specific geographical area for the non-compete must be defined in the agreement.

Source: Section 8-1-190

Dissolution of an Entity

If the partners or shareholders agree, a non-compete may be agreed upon by the owners of a dissolving business entity. The non-compete would prevent any owner from creating or working in the same or similar business.

Source: Section 8-1-190(6)

What is a “Lawful Profession”?

The Alabama District Court has made several factors to be considered to what constitutes a lawful profession:

  1. Professional training, skill, and experience required to perform certain services;
  2. Delicate nature of the services offered; and
  3. The ability and need to make instantaneous decisions.

Source: Friddle v. Raymond (1991)

Protectable Interest

A protectable interest, which is the basis for a non-compete in Alabama, is defined as the following:

  • Trade secrets. As defined in Section 8-27-2.
  • Confidential information. Including, but not limited to, pricing information and methodology; compensation; customer lists; customer data and information; mailing lists; prospective customer information; financial and investment information; management and marketing plans; business strategy, technique, and methodology; business models and data; processes and procedures; and company provided files, software, code, reports, documents, manuals, and forms used in the business that may not otherwise qualify as a trade secret but which are treated as confidential to the business entity, in whatever medium provided or preserved, such as in writing or stored electronically.
  • Commercial relationships or contacts. With specific prospective or existing customers, patients, vendors, or clients.
  • Goodwill. Customer, patient, vendor, or client goodwill associated with any of the following:
    • An ongoing business, franchise, commercial, or professional practice, or trade dress.
    • A specific marketing or trade area.
  • Unique training. 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.

Source: Section 8-1-191

Continued Employment

Consideration, outside of a promise of employment, is not required in Alabama. The continuation of at-will employment is recognized as sufficient consideration.

Source: Daughtry v. Capital Gas Company (1970)

Maximum Period

2 years is the maximum statutory limit for a non-compete. The term must also include a geographical area which can be specific municipalities, a mile radius, or a general area.

Source: Section 8-1-190(b)(4)

Geographical Area

The duration and geographical area, in combination, must be “reasonable” and example cases are listed below:

Blue Penciling Allowed

Yes, a court in Alabama may modify an agreement that is overly broad or unreasonable to be legal in accordance with State law.

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. 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.

Source: § 8-1-193

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