In Alabama, Non-Competes Must be Executed On or After an Employee’s Start Date

Applying Alabama law, the Eleventh Circuit issued an opinion that found Alabama’s statute  prohibiting restraints on trade prohibits the enforcement of a non-compete agreement executed just prior to an employee’s start date. The statute, Alabama Code Section 8-1-1, contains an exception that makes non-compete agreements in Alabama enforceable within the employer/employee context.  But the court, affirming the district court’s denial of the employer’s motion for a temporary restraining order, found the exception inapplicable to a situation where the employer/employee relationship had not yet begun. In this case, the employee signed the non-compete covenant only four days before his employment began.

This opinion should encourage Alabama employers to ensure that their new employees execute their non-compete covenants on or after their start dates. Employers in  other states where  restraints on trade are generally prohibited with limited exceptions should also take note.*Alabama, and the Eleventh Circuit, have signaled that these exceptions may be quite narrowly construed.

*Colorado, for instance, has a statute similar to Alabama’s. Florida’s statute, on the other hand, is framed differently; it finds restraints of trade generally permissible, with some exceptions.

Dawson v. Ameritox, Ltd., 571 Fed. Appx. 875 (11^th Cir. 2014)