Businesses often use non-compete agreements to prevent employees from either taking a job with a competitor or from starting a competing business for some period of time after leaving employment. Non-compete agreements are allowed in Tennessee. Courts will uphold a non-compete agreement that is reasonable in time and space, and necessary to protect legitimate interests. The public interest in competition must not be adversely affected, nor must there be an undue burden on the employee.
Is a Non-Compete Agreement Legally Enforceable in Tennessee?
Non-compete agreements, sometimes called covenants not to compete, are disfavored in Tennessee and will be interpreted strictly in favor of the employee. However, courts have ruled that when the agreement contains reasonable restrictions it can be enforced. [1]
A court will examine the consideration received in return for the agreement; the damage or danger to the employer in the absence of the non-compete agreement; the economic burden placed on the employee by the agreement, and whether or not the agreement harms the public interest in having competition.
What Can Be Protected?
In Tennessee, a non-compete agreement can be used to protect trade secrets and confidential information. Non-compete agreements can also be used for the retention of existing customers or to protect an employer’s investment in specialized training.training.training.training.training.training.
Reasonable Uses and Objections
- Enforceable when terminated without cause? Yes, though it may be a factor considered in enforceability
- Employee non-solicitation agreement permitted? Yes
- Customer non-solicitation agreements permitted? Yes
- Does continuing employment equal sufficient consideration? Yes
- Statute of Limitations for breach of contract: 6 years
Tennessee Non-Compete Limitations
Time limitations
Tennessee non-compete agreements must have a reasonable time limitation to be enforceable.
Geographical limitations
Tennessee non-compete agreements must have reasonable and definite geographical limitations to be enforceable. In addition, courts have held that any agreement that seeks to prevent an employee from working in a region where he has never provided services for the employer is excessive and unenforceable. [2]
Other limitations
Non-compete agreements covering physicians are governed by a special statute, Tennessee Code Annotated section 63-1-148. Such agreements may be made only for a duration of two years or less. In addition, the maximum allowable geographical restriction may be the greater of:
- A ten-mile radius from the location which was the primary practice site of the physician-employee OR
- The county in which the primary practice of the health care provider which employed the physician employee is located.
As an alternative to a geographic restriction, the physician-employee may be restricted from practicing at any facility where the employer provided services while the employee worked for them.
Non-compete agreements covering physicians must also be in writing and contained either in the employment contract or in a separate document signed by the parties.
Tennessee Non-Compete Agreement Sample
This Tennessee non-compete agreement template will let you draft an agreement for your business:
Non-Compete Agreement
