An Alabama Non-Compete Agreement is a legal document that prohibits employees from taking sensitive information with them when they leave an employer.
Alabama allows non-compete agreements only in a narrow scope. A non-compete agreement can protect against things like using customer lists, pricing information, confidential product data, and much more.
Reasonable Uses and Objections
- Enforceable when terminated without cause? – Yes.
- Employee non-solicitation agreement permitted? – Yes.
- Customer non-solicitation agreements permitted? – Yes.
- Does continuing employment equal sufficient consideration? – Yes.
Legally Enforceable in Alabama?
Non-compete agreements in Alabama are legally enforceable, but only in certain situations. The state passed a statute in 2018 that made non-compete agreements void and invalid except in specific situations spelled out within the statute.
The following items can be protected with a non-compete agreement in Alabama:
- Trade secrets (§ 8-27-2)
- Confidential information
- Commercial relationships or contacts with specific prospective or existing customers, patients, vendors, or clients
- Customer, patient, vendor, or client goodwill
- Specialized and unique training involving substantial business expenditure directed to a particular agent, servant, or employee (if identified in writing as consideration for the restriction).
Reasonable Use and Exceptions
Alabama has several defined reasonable uses and exceptions for non-compete agreements in the state.
The reasonable uses include:
- Must be in writing, signed by all parties, and supported by adequate consideration.
- Must preserve a protectable interest (§ 8-1-190).
- Employee-employer relationship must exist at the time the agreement is executed.
- A two-year restriction is presumptively reasonable.
- The employee must prove undue hardship if raised as a defense.
Exceptions to non-compete agreements in Alabama include:
- Professionals like doctors, lawyers, and more.
Limitations on Time
The state law states that non-competes should be reasonable regarding duration and geographic scope. While a specific time limit is not defined, court cases in the state have repeatedly shown that two years is the limit on what is considered reasonable.
However, it’s possible that a state court could judge that a time less than that is more reasonable. Generally, two years or fewer agreements have a higher chance of being enforceable.
Alabama does not have defined geographical limitations on non-compete agreements. However, the state generally errs on disapproving agreements unless they are reasonable.
So it is usually better to only set geographic limitations as necessary. Excessive geographic limitations covering a large land area will likely not be enforceable in the state.
Download an Alabama Non-Compete Agreement template in PDF or Word format here: