An Alabama non-compete agreement is a legal form that protects an employer from the risk of their employees competing with them post-termination. Companies often require applicants to complete the form as a prerequisite to being hired, which also serves as the consideration for the contract. In addition to preventing competition from the employee themselves, the agreement contains non-disclosure provisions that secure a company’s confidential information by barring the sharing of pivotal secrets and processes that could hamper the employer’s competitive advantage.
Per state law (§ 8-1-190), non-compete agreements are enforceable. However, not all non-competes will be upheld in a court of law.
- Sale of a company. The member(s) that are selling an entity can agree to refrain from competing with the buyer and/or from bringing along past customers. A geographic area needs to be set, and the timeframe should be no longer than one (1) year. (§ 8-1-190(b)(3))
- Dissolution of a company. Members that are dissolving an entity can unanimously agree to not engage in activity in the same geographic area where the business was originally operated. (§ 8-1-190(b)(6))
- Restricts a professional. If the non-compete restricts a person that engages in a “lawful profession”, it will not be enforced by a court of law. (§ 8-1-190(a))
- “Lawful Professions” includes physicians, attorneys, accountants, veterinarians, and physical therapists.
- Signed before employment. If the employee signed a non-compete prior to accepting employment (instead of at the time of hiring). (Dawson v. Ameritox, Ltd.)
- Independent contractors. Non-compete agreements and clauses are not enforceable if entered into between an employer and an independent contractor or subcontractor. (Premier Industrial Corporation v. Marlow)
Requirements / Recommendations
Two (2) years. Per § 8-1-190(4), non-competes that remain in effect for two (2) years or less are assumed to be reasonable.
If the recipient will be bound from competing in a specific location (e.g., Birmingham), the geographical area established should be reasonable and purposeful. Furthermore, the entity looking to enforce a non-compete needs to operate a like business in the area mentioned.
For new and existing employees alike, the promise of employment (or the promise of continued employment) serves as adequate consideration for restrictive agreements.
Yes. So long the contract abides by the requirements established by § 8-1-190, courts can rule out or modify specific non-compete provisions if they are deemed overly broad or restricting.
Non-disclosure agreement – A business form completed prior to engaging in the discussion of confidential information to prevent certain details from being shared with others.
Non-solicitation agreement – Prevents an employee from conducting business with an employer’s clients and customers post-termination.
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