Draft Enforceable Tennessee Noncompete and Nonsolicitation Agreements

Overview

Tennessee courts scrutinize restrictive covenants and enforce them only to the extent they are reasonable and necessary to protect legitimate business interests and consistent with public policy (see Hasty v. Rent-A-Driver, Inc.; Vantage Technology, LLC v. Cross). Noncompete agreements are treated as restraints of trade and disfavored, while nonsolicitation and confidentiality covenants are often viewed as more tailored when drafted narrowly.

What Tennessee Courts Consider

• Legitimate business interest: protection of confidential information/trade secrets, substantial customer relationships, and specialized training beyond ordinary skills (e.g., Vantage Technology).
• Reasonableness of scope: time, geography, and activities must be no broader than necessary (Hasty).
• Employee’s role and access: position, access to sensitive information, and customer contact are material.
• Consideration: what the employee received for agreeing to the restriction; continued employment has been held sufficient in Tennessee (Central Adjustment Bureau, Inc. v. Ingram).
• Public interest and hardship: impact on the employee’s ability to earn a livelihood and on the public (e.g., patient access to care).

Legitimate Business Interests

Identify and document the interests you are protecting: confidential information and trade secrets, substantial customer relationships developed at the employer’s expense, and specialized training that provides a competitive advantage. Tie restrictions directly to these interests in recitals and definitions to demonstrate necessity rather than anti-competitive intent (cf. Vantage Technology).

Noncompete vs. Nonsolicitation

Noncompete clauses restrict a former employee from working for or starting a competing business within a defined area and time. Nonsolicitation clauses typically prohibit solicitation of customers (often limited to those the employee served) and sometimes employees. Because nonsolicitation provisions can be more narrowly tailored to customer goodwill and specific relationships, courts often treat them as more likely to be reasonable when properly limited (see general reasonableness principles in Hasty).

Reasonable Scope: Time, Geography, and Activities

• Geography: Limit to territories where the employee actually worked or had material responsibility.
• Time: Use a duration no longer than needed to protect goodwill and confidential information, commonly 6–24 months depending on the role and sales cycle.
• Activities: Restrict only competitive activities the employee performed or supervised, tied to your products/services and markets.

Consideration and Timing

In Tennessee, continued at-will employment has been held sufficient consideration for a restrictive covenant (Central Adjustment). Best practice is to provide clear, separate consideration (e.g., bonus, promotion, equity, special training), present agreements before the start date when possible, and allow time for review.

Blue-Pencil and Reformation

Tennessee courts may modify or partially enforce overbroad covenants to render them reasonable (reformation/partial enforcement), but reliance on judicial rewriting is risky (see Central Adjustment; Allright Auto Parks, Inc. v. Berry). Draft with precision so the agreement stands on its own terms.

Trade Secrets and Confidentiality

Even without a noncompete, Tennessee’s trade secret laws and common-law duties can protect confidential business information. Strengthen your position with clear confidentiality definitions, access controls, exit interviews, and return-of-property requirements. See the Tennessee Uniform Trade Secrets Act (Tenn. Code Ann. § 47-25-1701 et seq.).

Healthcare-Specific Rules

The Tennessee Supreme Court has held that physician noncompetes are against public policy absent statutory authorization (Murfreesboro Medical Clinic, P.A. v. Udom). The Legislature subsequently authorized certain restrictive covenants for physicians and some other healthcare providers within strict limits—typically up to two years and within specified geographic bounds such as the county of the primary practice site or a ten-mile radius (Tenn. Code Ann. § 63-1-148). Employers in healthcare should tailor agreements to these statutory parameters.

Multi-State Employees and Remote Work

Some states restrict or bar noncompetes. If employees work across state lines, analyze whether Tennessee governing-law and forum provisions will be honored and consider state-specific addenda.

Enforcement Considerations

Preserve evidence of legitimate interests (customer lists, training materials, confidentiality protocols). Act promptly but proportionally. Consider whether targeted nonsolicitation or confidentiality relief will suffice. Courts weigh fairness, clarity, and actual competitive risk when deciding injunctive relief.

Common Pitfalls

• Geographic or industry-wide bans unconnected to the employee’s role.
• Vague customer nonsolicitation that sweeps in prospects unrelated to the employee’s work.
• Insufficient consideration or last-minute presentation without time to review.
• Weak internal confidentiality practices that undercut protectable-interest claims.
• One-size-fits-all templates not tailored to responsibilities and markets.

Practical Template Tips

• Use role-specific schedules to define competitors, territories, and key accounts.
• Tie restrictive periods to verifiable business cycles (e.g., average sales cycle).
• Limit customer nonsolicitation to customers with whom the employee had material contact in a defined lookback period.
• Include reasonable tolling for periods of breach, severability, and reformation language consistent with Tennessee law.
• Confirm the agreement does not impede protected activity (e.g., whistleblowing, NLRA rights).

When to Use a Noncompete

Reserve noncompetes for roles with access to high-value confidential information, strategic plans, or key client relationships where lesser restrictions are inadequate. In many other roles, a well-crafted nonsolicitation and confidentiality package is a better fit.

FAQ

Is continued employment enough consideration in Tennessee?

Yes, Tennessee courts have held continued at-will employment can be sufficient consideration, though separate consideration is best practice.

Will a Tennessee court rewrite an overbroad covenant?

Courts may reform or partially enforce to a reasonable scope, but overbreadth increases litigation risk and uncertainty.

Are physician noncompetes enforceable?

Only within the limits authorized by statute for certain providers; otherwise they are against public policy.

How long is reasonable for a nonsolicit?

Often 6–24 months depending on role, sales cycle, and the scope of customer relationships.

Next Steps

Audit current agreements and roles, map legitimate interests to specific restrictions, and update templates to reflect Tennessee law. Present agreements early, explain the business rationale, and document consideration. For enforcement questions or hiring from a competitor, consult counsel. Contact our team for help drafting or reviewing your agreements.

Disclaimer

This post provides general information about Tennessee law and is not legal advice. Laws change, and outcomes depend on specific facts. Special rules apply to certain healthcare providers under Tenn. Code Ann. § 63-1-148. Consult a licensed Tennessee attorney before acting.