Are Non-Compete Agreements Enforceable in Alabama?

Even though Alabama law says that “contracts restraining business” such as non-compete agreements are void, there are so many exceptions to that law that non-competes are usually valid as long as they are reasonable, even if you’re laid off or fired. The law says an “employee may agree with his employer to refrain from carrying on or engaging in a similar business and from soliciting old customers…” which is the exception that most sales employees fall under. However, in order to be enforceable courts have ruled that: (1) the employer has to have a protectable interest; (2) the restriction has to be reasonably related to that interest; (3) the restriction is reasonable as to time and place; and (4) the restriction imposes no undue hardship on the employee.

If your job was to go through the phone book and cold call people and ask them to buy your product that probably would not constitute a protectable interest because a phone book is something that is available to the public. However, if you and your employer had spent years cultivating relationships with customers, that list of customers would constitute a protectable interest. In terms of the restriction being related to the protectable interest, if the protectable interest is a customer list and you went to work for a company which sold the same goods but you were not involved in sales you should not be restricted from taking that job. Non-compete agreements that restrict former employees from competing within the same geographic region where their former employer does business (but not nationwide) for two years have been held valid. Regarding the “undue hardship” criteria, that is usually determined on a case by case basis. Alabama courts have held that a 6 month restriction on an employee who had only worked for a company for 2 months and was recently married imposed an undue hardship. Considering your ten years of employment, 2 years may not be considered an undue hardship depending upon all of the other circumstances.

Professionals who have specialized education and are required to take a test to receive a license like lawyers, doctors, and engineers are not subject to non-compete agreements. If your employer requires you to sign a non-compete agreement you need to consider the consequences carefully. And yes, your employer can refuse to hire you or fire you for refusing to sign a non-compete agreement.

If you lose your job and are subject to a non-compete agreement, you have two options: (1) find a non-competing job; or (2) take a competing job, run the risk of getting sued, hire a lawyer to defend you, and argue that the restrictions are unreasonable and impose an undue hardship on you. I should caution you that some non-compete agreements contain clauses that require you to pay your former employer’s attorney fees if you lose and some contain liquidated damages clauses which impose an extreme monetary penalty.

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