In Tennessee, restrictive employment covenants are enforceable if they are reasonable under the particular circumstances. The law in Tennessee is clear that the enforceability of restrictive employment covenants rests upon the law and public policy of the state in which the enforcement is sought.
"Reasonableness" has several components, requiring both temporal and geographic reasonableness in the restrictions and that the restrictions are necessary to protect a legitimate interest of the employer.
Geographic and temporal reasonableness, requires that the restriction be only so broad as necessary to protect the employer's interests against unfair competition. There are no hard and fast rules as to what is reasonable-one must look at the business, the nature of the competition, the existence of trade secrets, and similar factors in drafting limitations which are not overreaching.
Tennessee courts have generally upheld three-year periods as being reasonable. However, in some instances as short as two years is seen as too long a period, but typically this will be based on the nature of the business and the needs of the employer.
With respect to the geographic scope, courts have been known to uphold covenants of national scope, if the employer has a legitimate interest in prohibiting nationwide employment. This is typically only the case if the employer is nationwide and the employee has nationwide responsibilities.
When considering the interest of the employer, Tennessee courts have looked to the reasoning behind the parties entering into the non-competition agreement. Tennessee courts generally find reasonable a restriction on a former employee's contact with customers where there was an association between the business and the former employee. In the context of a non-compete agreement entered into incidental to the sale of a business, Tennessee courts are near unanimous in their upholding of the restrictive covenants.
In each case, noncompete agreements are very serious matters that are examined on a case-by-case basis. Often, whether there is an enforceable noncompete agreement depends on a very thorough examination of the facts of the case.
