If you`re a business owner in Tennessee, you may be familiar with non-compete agreements. These contracts are meant to prohibit employees from working for competitors or starting their own competing businesses for a certain period of time after leaving your company.
But are non-compete agreements enforceable in Tennessee? The short answer is yes, they are. However, there are certain rules and restrictions you must follow to ensure the agreement is valid and enforceable.
First, the agreement must be reasonable in terms of duration and scope. This means that the time period for which the employee is prohibited from working for a competitor must be limited and reasonable, and the geographic scope must be reasonable as well. For example, a non-compete agreement that prohibits an employee from working for a competitor in the entire state of Tennessee for five years would likely be considered unreasonable.
Second, the non-compete agreement must be supported by consideration. This means that the employee must receive something of value in exchange for agreeing to the non-compete, such as a promotion, a raise, or access to confidential information.
Third, the non-compete agreement must protect legitimate business interests. This means that the agreement must be necessary to protect the company`s trade secrets or confidential information, or to prevent the employee from taking advantage of the company`s customer relationships.
If a non-compete agreement meets these requirements, it is generally enforceable in Tennessee. However, it`s important to note that courts will not enforce non-compete agreements that are overly restrictive or that unduly limit an employee`s ability to earn a living.
Additionally, Tennessee law allows courts to “blue pencil” or modify non-compete agreements to make them less restrictive and more reasonable. For example, if a non-compete agreement prohibits an employee from working for a competitor for ten years, a court may modify the agreement to limit the time period to three years.
In summary, non-compete agreements are enforceable in Tennessee, but they must be reasonable in terms of duration and scope, supported by consideration, and necessary to protect legitimate business interests. If you`re considering using a non-compete agreement in your business, it`s important to consult with an attorney to ensure the agreement is valid and enforceable.
