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 (11th Cir. 2014)
