Alabama Non-Compete Agreement Template

Yes, a non-compete is legal to preserve a protectable interest in Alabama.^[1]

A non-complete is allowed for employees except those performing a “lawful profession.”^[2]

There is no definition for the term “lawful profession,” although, the following court cases have decided specific types:

• Accountants. Considered a lawful profession.^[3]
• Attorneys. Considered a lawful profession.^[4][5]
• Exterminators (pest). NOT considered a lawful profession.^[6]
• Optometrists. NOT considered a lawful profession.^[7]
• Physicians. Considered a lawful profession.^[8]
• Physical therapists. Considered a lawful profession.^[9]
• Prosthetists. NOT considered a lawful profession.^[10]
• Seasonal tax preparers. NOT considered a lawful profession.^[11]
• Securities brokers. Considered a lawful profession.^[12]
• Veterinarians. Considered a lawful profession.^[13]

A non-compete with an independent contractor is not enforceable in Alabama.^[14]

A seller of a business is permitted 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.^[15]

If the partners or shareholders agree, a non-compete is permitted between the owners dissolving business entity. The non-compete would prevent any owner from creating or working in the same or similar business.^[16]

The Alabama District Court has made several factors to be considered to what constitutes a lawful profession:

1. Professional training, skill, and experience required to perform certain services;
2. Delicate nature of the services offered; and
3. The ability and need to make instantaneous decisions.^[17]

A protectable interest, which is the basis for a non-compete in Alabama, is defined as the following:

• Trade secrets. A trade secret is information that is used or intended for use in a trade or business; is included or embodied in a formula, pattern, compilation, computer software, drawing, device, method, technique, or process; is not publicly known and is not generally known in the trade or business of the person asserting that it is a trade secret; cannot be readily ascertained or derived from publicly available information; is the subject of efforts that are reasonable under the circumstances to maintain its secrecy; and has significant economic value.^[18]
• 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.^[19]

Continued employment is permitted as consideration for a non-compete in Alabama. No outside payment or promise is required.^[20]

The duration and geographical area, in combination, must be “reasonable.”

See 4 sample cases below that were approved in the court:

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

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.^[22]