Tennessee Noncompete Agreements: Protecting Real Estate Firms

Why Noncompetes Matter for Real Estate Firms

Brokerages and property management companies invest in training, lead generation, market insights, and client relationships. A noncompete aims to prevent key personnel from immediately leveraging those investments to compete after departure. Tennessee law allows reasonable restrictions, but courts scrutinize scope and fairness, and narrower tools often fit the industry context better.

Tennessee’s General Approach to Noncompetes

Tennessee courts evaluate noncompetes for reasonableness based on the employer’s legitimate business interests and the agreement’s scope—geography, function, and duration. Courts consider protectable interests like confidential information, specialized training, and customer goodwill, and they expect restrictions to align with the employee’s actual territory and role. Hasty v. Rent-A-Driver, Inc.; Vantage Technology, LLC v. Cross.

Tennessee courts may modify overbroad covenants and enforce them to the extent reasonable, but outcomes are fact-specific and uncertain. Draft with precision rather than banking on judicial revision. Central Adjustment Bureau, Inc. v. Ingram.

Special Considerations in Real Estate

Real estate professionals often work within defined territories and rely on firm-generated leads, marketing systems, and client lists. When drafting:

• Align geography with the agent’s or manager’s actual service area.
• Narrowly define competitive activities (for example, brokerage or management services similar to those performed at the firm).
• Avoid blanket bans that reach unrelated real estate services.
• Use precise definitions for confidential information, firm-sourced leads, and active listings.

These steps support enforceability and reduce disruption to clients. See the reasonableness and protectable-interest analysis in Vantage Technology.

Noncompete vs. Non-solicitation and Confidentiality

Targeted non-solicitation clauses (limiting solicitation of firm clients, firm-sourced prospects, and current personnel) and robust confidentiality/trade secret protections can often safeguard core interests without broadly restricting where a professional may work. Tennessee’s trade secret law authorizes injunctive relief for actual or threatened misappropriation. Tenn. Code Ann. § 47-25-1701 et seq.; § 47-25-1703; see also Vantage Technology.

Key Drafting Tips

• Tie restrictions to legitimate interests: confidential data, specialized training, goodwill, active listings, and firm-funded leads.
• Calibrate geographic scope to markets actually served.
• Limit functional scope to roles and services the worker performed.
• Use a tailored duration that reflects business realities.
• Include separate non-solicitation and confidentiality provisions.
• Carve out general knowledge and publicly available information.
• Add return-of-property and secure data-removal procedures at separation.
• Consider garden leave or a brief notice period for senior roles.
• Include severability and, where appropriate, equitable-relief language.

Compensation Structure and Independent Contractors

Many Tennessee real estate firms engage agents as independent contractors. Classification does not automatically determine enforceability; courts still assess legitimacy and reasonableness case-by-case. Agreements should avoid terms that undermine independent-contractor status while clearly addressing confidentiality, ownership of firm-sourced leads, and return-of-materials obligations.

Enforcement and Practical Steps

Before pursuing enforcement, confirm the restriction matches the person’s actual territory and responsibilities. Preserve evidence of confidential information access, firm-funded lead generation, and risks to client transitions. Consider interim business solutions—mutual client notices, limited waivers, or transition protocols—to reduce disruption. Tennessee courts may grant injunctive relief when a protectable interest and likely success on the merits are shown; trade secret statutes specifically authorize injunctions against misappropriation. Tenn. Code Ann. § 47-25-1703.

Alternatives that Reduce Risk

• Non-solicitation of clients and personnel focused on firm-sourced relationships.
• Nondisclosure and trade secret protocols backed by training and access controls.
• Listing protection periods for active transactions.
• Targeted exclusivity during affiliation plus reasonable post-termination covenants.
• Commission/referral agreements clarifying ownership of deals originating from firm resources.

Takeaways for Tennessee Real Estate Leaders

In Tennessee, precision beats breadth. Focus on legitimate interests, narrow the scope to actual territories and roles, and consider whether non-solicitation and confidentiality tools can achieve your goals with less risk than a broad noncompete. Update templates regularly to reflect current markets and technology.

FAQ

Are noncompetes enforceable against independent contractor agents?

Yes, if reasonable and tied to legitimate interests. Courts focus on scope and fairness rather than worker classification alone.

What duration is typical in Tennessee?

Durations vary by role and market. Many agreements range from 6 to 24 months, calibrated to sales cycles and protectable interests.

Can a court rewrite an overbroad covenant?

Courts may modify overbroad terms and enforce them to a reasonable extent, but outcomes are fact-specific, so precise drafting is best.

Is a non-solicitation enough without a noncompete?

Often yes for real estate firms, especially when combined with robust confidentiality and access controls protecting firm-sourced leads and data.

Notes on Tennessee-Specific Rules

Some professions are governed by specific rules. For example, certain healthcare covenants are addressed by statute, and attorneys are restricted by professional conduct rules. See Tenn. Code Ann. § 63-1-148 (healthcare-specific provisions) and Tennessee RPC 5.6 (lawyers).

Citations

• Hasty v. Rent-A-Driver, Inc., 671 S.W.2d 471 (Tenn. 1984)
• Central Adjustment Bureau, Inc. v. Ingram, 678 S.W.2d 28 (Tenn. 1984)
• Vantage Technology, LLC v. Cross, 17 S.W.3d 637 (Tenn. Ct. App. 1999)
• Tenn. Code Ann. § 47-25-1701 et seq. (TUTSA)
• Tenn. Code Ann. § 47-25-1703 (injunctions)
• Tenn. Code Ann. § 63-1-148 (healthcare covenants)
• Tennessee Rule of Professional Conduct 5.6

Disclaimer

This post reflects Tennessee law as of the date listed and is for general informational purposes only. It is not legal advice and does not create an attorney-client relationship. Tennessee’s rules may vary by industry (for example, healthcare and law), and federal developments may affect enforceability. Consult qualified Tennessee counsel about your specific facts. We can help.