Is a covenant not to compete enforceable in court?
It is certainly understandable why employers do not want to hire employees, train them in the business, and share company secrets, only to see them leave the company, set up shop for themselves, and go into direct competition with their former employer. Likewise, when people go into business together as partners, they may wish to address the situation where one of the principals leaves the business, and whether that person should be allowed to compete with the former company. These matters are addressed in contracts and employment agreements through covenants not to compete. However, these documents are often found to be unenforceable by courts who view them as unlawful restraints on trade or business.
Alabama’s law on the books does little to clarify the matter. It includes language that both prohibits and allows non-compete covenants, regarding both employer-employee relationships and partnership arrangements. This law has been litigated in the Alabama courts, but the various court decisions don’t do much to provide clear guidance to people wishing to make such covenants. It is clear from the statute that any covenant should be limited in geographic scope, such as limiting the application of the non-compete clause to a specified county or city where the primary business was taking place. According to the case law, a reasonable non-compete clause should be limited in time as well, such as one to three years as opposed to an infinite duration.
The best course of action is to consult an experienced business law attorney who can analyze the law as it applies to your particular situation, advise you appropriately, and assist in drafting contract language most likely to be upheld in a court of law.