Non-competition agreements, also known as covenants not to compete or restrictive covenants, are employment contracts used by employers to limit the ability of an employee to compete with the employer by stealing customers or trade secrets. Enforceable agreements must strike a balance between protecting the employer's legitimate business interests from an unfair competitive advantage with the employee's right to work in a field for which he or she is trained. In general, courts decide what is considered reasonable or not reasonable by examining the type and size of the business, how long and over what geographic area the restrictions apply and whether adequate consideration, or benefit, was given the employee at the time the agreement was signed.
The Law In Tennessee
While Tennessee law, in general, prohibits agreements between persons or corporations that tend to restrain trade, the courts have recognized agreements between employers and employees when they are:
- to prevent solicitation of the employer's existing customers;
- to protect the employer's trade or business secrets and confidential information; and
- to protect the employer's substantial investment in employee training or enhancing the employee's skill and experience.