Non-Compete Agreements in Alabama: A Guide for Employers and Employees

In the world of business, protecting your company’s assets—its clients, trade secrets, and reputation—is paramount. However, Alabama law balances this business need against an individual’s right to earn a living.

If you are an employer drafting a contract, or an employee being asked to sign one, a common question arises: Are non-compete agreements actually enforceable in Alabama?

The short answer is yes, but with significant caveats. Alabama law is unique in its approach to restrictive covenants. Below, we break down the statutory framework, the specific requirements for enforceability, and the common pitfalls that can render an agreement void.

The General Rule: Presumption of Voidness

Unlike some states where non-competes are viewed neutrally, Alabama law starts with a skeptical eye. Under Ala. Code § 8-1-190(a), the general rule is that every contract restraining someone from exercising a lawful profession, trade, or business is void.

The reasoning behind this is public policy: the law discourages contracts that deprive the public of efficient service or impoverish the individual being restrained.

However, Ala. Code § 8-1-190(b) provides specific statutory exceptions. If an agreement falls into one of these exceptions—and meets specific criteria—it can be enforced.

The Four Core Requirements for Enforceability

For a non-compete agreement to hold up in an Alabama court, the employer generally holds the burden of proof. The agreement must meet four distinct conditions:

The employer must have a protectable interest.
The restriction must be reasonably related to that interest.
The restriction must be reasonable in time and place.
The restriction must not impose an undue hardship on the employee.

1. What Qualifies as a “Protectable Interest”?

You cannot restrict an employee simply to prevent competition. You must prove you are protecting a specific asset. Ala. Code § 8-1-191(a) explicitly defines protectable interests as including:

Trade secrets and confidential information.
Commercial relationships with specific existing customers, clients, vendors, or patients.
Goodwill associated with an ongoing business or franchise.
Specialized training: This refers to training involving substantial expense specifically directed to the employee (and must be set forth in writing).

Note: Simple job skills, even if acquired on the job, are not a protectable interest.

2. Reasonableness of Time

How long can a non-compete last? Alabama law provides “presumptions of reasonableness” regarding duration:

Employee Non-Competes: Restraints of two years or less are presumed reasonable.
Sale of a Business: Restraints of one year or less are presumed reasonable.
Non-Solicitation of Customers: Restraints of 18 months (or as long as post-separation consideration is paid) are presumed reasonable.

Lengthy durations outside these norms generally render an agreement unenforceable.

3. Reasonableness of Place (Geography)

A non-compete cannot cover the entire world. The geographic scope must be limited to the territory where the employee was active and where the employer carries on a “like business.”

For example, a clause forbidding an employee from competing globally was found unenforceable by the Alabama Supreme Court in Westwind Techs., Inc. v. Jones. To be enforceable, the map must match the actual business footprint.

4. The “Professional” Exemption (Undue Hardship)

This is a critical distinction in Alabama law. Non-compete agreements are generally unenforceable against professionals. Courts have determined that restricting these individuals imposes an undue hardship on them and prejudices the public interest.

This exemption has been specifically extended to:

Attorneys
Physicians
Certified Public Accountants (CPAs)
Veterinarians
Physical Therapists

The Importance of Timing and Consideration

A valid contract requires “consideration” (something of value exchanged for the promise).

Continued Employment: In Alabama, continued employment is sufficient consideration, even if the employee is “at-will.”
The Timing Trap: The employment relationship must exist at the time the agreement is signed. Agreements entered into before the start of the employment relationship (e.g., weeks before the first day of work) have been deemed void at their inception (Pitney Bowes, Inc. v. Berney Office Solutions).

The “Blue Pencil” Rule

What happens if a non-compete is slightly too broad? Alabama follows the “Blue Pencil” rule. This grants a judge the discretion to reform (rewrite) the contract to make it reasonable regarding time or territory, rather than throwing the whole contract out.

However, if the restraint does not fall within a statutory exception at all, the court may void the restraint entirely.

Common Drafting Pitfalls

When we review or litigate non-compete agreements, we often see the same mistakes that make them difficult or impossible to enforce:

Overbroad Restrictions: Prohibiting an employee from working in a competing business “in any capacity” (even as a janitor) is often viewed as unreasonable.
Uniform Agreements: Using the same geographic restrictions for a C-level executive and an administrative assistant suggests the company isn’t protecting a legitimate interest, but rather trying to stifle general competition.
Lack of Protectable Interest: Trying to enforce a non-compete against an hourly employee who had no access to trade secrets or specialized training is generally inappropriate.

Conclusion

Non-compete agreements in Alabama are powerful tools, but they must be crafted with precision. A “one-size-fits-all” document downloaded from the internet rarely survives judicial scrutiny in this state. Whether you are a business owner seeking to protect your trade secrets or a professional analyzing a new employment contract, it is vital to understand the specific statutory framework that governs these relationships.

If you have any questions about this article or non-competes in general, please give me a call or schedule a consultation today. You can also refer to my Business page for more information.

Disclaimer: This article provides a general overview of Alabama property law and does not constitute legal advice or create an attorney-client relationship. You should consult an attorney regarding your specific legal situation.