Alabama Non-Compete Agreement Template

Updated January 18, 2023

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:

Accountants. Considered a lawful profession.
- Burkett v. Adams (1978)
Attorneys. Considered a lawful profession.
- Rule 5.6
- Pierce v. Hand, Arendall, Bedsole, Greaves & Johnston (1996)
Exterminators (pest). NOT considered a lawful profession.
- Dobbins v. Getz Exterminators (1980)
Optometrists. NOT considered a lawful profession.
- Board of Optometry v. Eagerton (1981)
Physicians. Considered a lawful profession.
- Odess v. Taylor (1968)
Physical therapists. Considered a lawful profession.
- Benchmark Medical Holdings, Inc. v. Barnes (2004)
Prosthetists. NOT considered a lawful profession.
- J.E. Hanger, Inc. v. Scussel (1996)
Seasonal tax preparers. NOT considered a lawful profession.
- H&R Block Eastern Enterprises Inc. v. Village Tax Team (2005)
Securities brokers. Considered a lawful profession.
- G.L.S & Associates, Inc. v. Keith Rogers (2014)
Veterinarians. Considered a lawful profession.
- Friddle v. Raymond (1991)

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:

Professional training, skill, and experience required to perform certain services;
Delicate nature of the services offered; and
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:

2 years and a 50-mile radius
- G.L.S & Associates, Inc. v. Keith Rogers (2014)
2 years and a 50-mile radius
- J.E. Hanger, Inc. v. Scussel (1996)
2 years and Statewide
- Central Bancshares of the South v. Puckett (1991)
1 year and east of the rocky mountains
- Parker v. Ebsco Industries, Inc. (1968)

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