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Alabama Non-Compete Agreement | Laws & Enforceability

Updated on April 16th, 2023

An Alabama non-compete agreement is a restraint against a person from performing a service or profession in a specific area and time period. A non-compete is valid if it intends to preserve a protectable interest and is not against a person within a lawful profession. Depending on the type of non-compete, it can last for a maximum period of 1-2 years to be considered reasonable.

A non-compete in Alabama against an independent contractor is prohibited.

Table of Contents

Are Non-Competes Enforceable in Alabama?

Yes, a non-compete is enforceable if it serves to safeguard a “protectable interest” and is not against a “lawful profession.” (§ 8-1-190)

A non-compete is enforceable and legal against:

  • An employee, agent, or servant;
  • The sale of a business; and
  • The dissolution of a partnership.

Independent Contractors (prohibited)

A non-compete is unenforceable against an independent contractor (Premier Industrial Corporation v. Marlow (1974)).

Protectable Interest”

A non-compete must have a “protectable interest” and is defined under § 8-1-191, which includes:

  • Trade secrets. As defined under § 8-27-2;
  • Confidentidential information. Most types of internal company data, such as customer information, business strategies, and marketing reports;
  • Commercial relationships;
  • Customer or client goodwill; and
  • Specialized or unique training.

Examples of Reasonable Professions

The Alabama courts have deemed the following professions to be legal to enter into non-competes:

“Lawful Professions” (prohibited)

A non-compete against a “lawful profession” is not allowed in Alabama. The term is not defined under the statutes, but the following laws and cases have ruled there to be at least six (6) types:

Simple Labor Skills (prohibited)

An employee with simple labor skills is not allowed to enter into a non-compete.

For example, in Nobles-Hamilton v. Thompson (2004), an employee at a health foods store cannot be subject to a non-compete as they do not hold any protectable interest. The court specifically ruled, “A simple labor skill, without more, is simply not enough to give an employer a substantial protectable right unique in his business.”

Terminating an Employee

The Alabama courts have enforced a non-compete against discharged employees (Harkness v. Scottsboro Newspaper (1988), Eastis v. Veterans Oil, Inc. (2010)).

However, a court will not recognize a non-compete agreement signed to prohibit a person from working in the same industry. For example, in Robinson v. Computer Servicenters, Inc. (1977), the employer intended to terminate the employee on the same date as signing a non-compete).

Burden of Proof

Both parties are required to show a burden of proof under State statute (§ 8-1-194). The party seeking enforcement of a non-compete must provide a burden of proof, and the party resisting must provide evidence of undue hardship.

Continued Employment (consideration)

A written contract in Alabama must have “adequate consideration” to be legally binding (§ 8-1-192). The courts in Alabama have ruled in the past, such as in Daughtry v. Capital Gas Company (1970), that continued employment is adequate consideration.

However, the State statutes on January 1, 2016, repealed the laws stating that continued employment is sufficient consideration (§ 8-1-1). Therefore, it’s not with 100% certainty that continued employment remains sufficient consideration.

Maximum Term

A non-compete for the periods mentioned below is determined to be reasonable under State statute:

Blue Penciling (allowed)

Under § 8-1-193, an Alabama court may void specific restraints if a non-compete is overly broad or unreasonable. In addition, the court may go as far as re-writing the duration or geographical areas of a non-compete to make it reasonable (Mason Corporation v. Kennedy (1971)).