Employee Non-Compete Agreement and Enforceability Memo — Tennessee

TENNESSEE Employee Non-Compete Agreement and Enforceability Memo

Quick-Reference Summary

Part A — Enforceability Memo

MEMORANDUM

TO: [CLIENT NAME]
FROM: [ATTORNEY NAME], [EMPLOYMENT GROUP]
DATE: [__/__/____]
RE: Enforceability of Proposed Non-Compete Covenant — [EMPLOYEE NAME] — Tennessee Law

I. Question Presented

Whether the proposed non-compete covenant between [EMPLOYER] and [EMPLOYEE], restricting [EMPLOYEE]'s post-termination ability to engage in [COMPETITIVE ACTIVITY] within [GEOGRAPHIC AREA] for [DURATION], is enforceable under Tennessee common law and (where applicable) T.C.A. § 63-1-148.

II. Short Answer

[☐ Likely enforceable as drafted] [☐ Likely enforceable if narrowed as recommended below] [☐ Subject to T.C.A. § 63-1-148 — verify healthcare-provider compliance] [☐ Unlikely to be enforceable without material revision]. Tennessee courts apply rule-of-reason scrutiny, may modify overbroad covenants (blue-pencil), and disfavor enforcement absent a clear protectable interest.

III. Threshold — Healthcare Provider Statute (T.C.A. § 63-1-148)

Is the Employee a "healthcare provider" under T.C.A. § 63-1-148(c)? The statute covers physicians and includes other listed providers (e.g., podiatrists, chiropractors, dentists; see statute for full list). [☐ Yes → § 63-1-148 controls; verify compliance with all subsections] [☐ No → proceed to common-law analysis].

If § 63-1-148 applies:

1. Writing & signatures. Covenant in writing and signed by both parties. [☐ Yes] [☐ No → unenforceable]
2. Duration. ≤ 2 years from termination. [☐ Yes] [☐ No → unenforceable]

3. Geography (one of):
   - ≤ 10-mile radius from the provider's practice site, OR
   - The county in which the provider practiced, OR
   - No geographic limit + restriction barring practice at any facility for which the employer provided services while the provider was employed.
   [☐ Compliant] [☐ Non-compliant → unenforceable]

4. Sale-of-practice. T.C.A. § 63-1-148(d) rebuttable presumption of reasonableness for agreed duration and area.

5. Hospital / dialysis / faculty plan / nursing home. Verify additional § 63-1-148 restrictions.

IV. Common-Law Reasonableness (Allright / Hasty / Vantage Technology)

For non-healthcare employees (or non-physician practitioners not covered by § 63-1-148):

A. Special facts / protectable interest (Hasty). The employer must show something more than ordinary competition. Recognized protectable interests: trade secrets and confidential information; customer relationships in which the employer invested time, effort, and money; specialized training; goodwill.

Here: [DESCRIBE — e.g., proprietary customer database, $[___] training investment, confidential pricing]. [☐ Strong] [☐ Moderate] [☐ Weak] showing.

B. Reasonableness factors (Vantage Technology, 17 S.W.3d at 644).

1. Consideration to the employee — [describe]
2. Threat to the employer if covenant not enforced — [describe]
3. Economic hardship to the employee — [describe]
4. Public interest — [describe]
5. Reasonableness of time and geography — [describe]

C. Time and geographic scope. Typically 6 months to 2 years; geographic scope tailored to actual employee activity and customer contact.

V. Blue-Pencil / Partial Enforcement

Tennessee permits courts to modify overbroad covenants to make them reasonable. However, courts disfavor doing so where overreach is egregious — drafters should not rely on reformation as a safety net. Vantage Technology, 17 S.W.3d at 645.

VI. Consideration

[☐ Initial employment — sufficient] [☐ Continued at-will employment for "appreciable length of time" — supported by Central Adjustment Bureau v. Ingram, 678 S.W.2d 28 (Tenn. 1984); best practice still recommends independent consideration] [☐ Independent consideration provided: $[___] signing payment / raise / promotion / equity grant].

VII. Recommendations

1. [☐ Confirm whether Employee is a "healthcare provider" under § 63-1-148; if so, ensure full statutory compliance]
2. [☐ Define function with specificity — role and duties, not industry]
3. [☐ Narrow geographic scope to: ____________________]
4. [☐ Limit duration to ___ months (6–24 typical, ≤ 24 for healthcare providers)]
5. [☐ Document protectable interest with evidence (training investment receipts, customer-relationship history, confidential information inventory)]
6. [☐ Document independent consideration if mid-employment covenant]
7. [☐ Pair non-compete with NDA / trade-secret covenant (Tennessee UTSA, T.C.A. § 47-25-1701 et seq.) and narrow non-solicit]
8. [☐ Include reasonable blue-pencil / partial enforcement clause]

VIII. Conclusion

[CONCISE FINAL ASSESSMENT — 2–4 sentences.]

Part B — Non-Compete Agreement

EMPLOYEE NON-COMPETITION, NON-SOLICITATION, AND CONFIDENTIALITY AGREEMENT

This Employee Non-Competition, Non-Solicitation, and Confidentiality Agreement (the "Agreement") is entered into as of [__/__/____] (the "Effective Date") between [EMPLOYER LEGAL NAME], a Tennessee [ENTITY TYPE] with its principal place of business at [ADDRESS] ("Company"), and [EMPLOYEE FULL LEGAL NAME], residing at [ADDRESS] ("Employee").

1. Recitals and Consideration

A. The Company is engaged in [DESCRIBE BUSINESS — specific].

B. The Employee will have access to (i) Confidential Information; (ii) customer and prospect relationships developed through Company investment; and (iii) [☐ specialized training] [☐ trade secrets] [☐ goodwill].

C. Healthcare Provider Status. [Complete one:] [☐ The Employee is NOT a "healthcare provider" under T.C.A. § 63-1-148, and this Agreement is governed by Tennessee common-law reasonableness.] [☐ The Employee IS a healthcare provider; this Agreement is structured to comply with T.C.A. § 63-1-148, including the duration and geographic limits set out in Section 4 and Section 5.]

D. In consideration of [☐ initial employment] [☐ continued at-will employment for an appreciable length of time consistent with Central Adjustment Bureau v. Ingram, 678 S.W.2d 28 (Tenn. 1984)] [☐ signing payment of $[___]] [☐ promotion to [____] with salary increase of $[___]] [☐ equity grant] [☐ other independent consideration: __________], and the mutual covenants, the Parties agree as follows.

2. Definitions

"Competitive Business" means a business that [DESCRIBE WITH SPECIFICITY — products/services that compete directly].

"Confidential Information" means non-public Company information regarding [customers, pricing, methods, financials, technology], excluding information that is publicly known, lawfully obtained from a third party, or already known to the Employee before disclosure.

"Restricted Period" means the period of Employee's employment plus [______] months (NOT TO EXCEED 24, AND NOT TO EXCEED 24 FOR HEALTHCARE PROVIDERS UNDER T.C.A. § 63-1-148) following termination of employment for any reason.

"Restricted Territory" means [DEFINE — e.g., the Tennessee counties in which the Employee performed services or had material customer contact during the 12 months preceding termination; or a [___]-mile radius of the Company's [LOCATION] office. FOR HEALTHCARE PROVIDERS: not more than a 10-mile radius from the practice site OR the county in which the provider practiced, consistent with T.C.A. § 63-1-148(b)(2)(A)].

"Restricted Role" means a role that involves the same or substantially similar duties to those the Employee performed for the Company during the 12 months preceding termination — specifically, [LIST DUTIES].

"Restricted Customers" means customers and actively-pursued prospects of the Company with whom the Employee had material contact, or about whom the Employee received Confidential Information, during the 12 months preceding termination.

3. Confidentiality

The Employee shall not, during or after employment, use or disclose Confidential Information except in the proper performance of duties or as required by law. Upon termination, the Employee shall return or destroy all Confidential Information. Nothing in this Agreement prohibits reporting possible violations of law to a government agency.

4. Non-Competition

During the Restricted Period and within the Restricted Territory, the Employee shall not engage in a Restricted Role for any Competitive Business. This restriction does not prohibit the Employee from accepting employment with a Competitive Business in a role materially different from the Restricted Role.

5. Healthcare Provider Compliance (if applicable)

If and to the extent the Employee is a "healthcare provider" under T.C.A. § 63-1-148: (a) the duration of the restriction shall not exceed 2 years from termination; (b) the geographic restriction shall not exceed a 10-mile radius from the Employee's primary practice site OR the county in which the Employee practiced; OR (c) in lieu of geographic restriction, the Employee shall not practice at any facility for which the Company provided services during the period of the Employee's employment.

6. Non-Solicitation of Customers

During the Restricted Period, the Employee shall not solicit any Restricted Customer for purposes of providing products or services that compete with the Company.

7. Non-Solicitation of Employees

During the Restricted Period, the Employee shall not solicit any Company employee with whom the Employee worked or had material contact during the 12 months preceding termination to terminate employment with the Company.

8. Acknowledgments

The Employee acknowledges that the restrictions are reasonable, necessary to protect legitimate business interests, and that the Employee has had an opportunity to consult with counsel.

9. Remedies

The Company may seek temporary, preliminary, and permanent injunctive relief in the Chancery Court for [______] County, Tennessee (or county where the Employee resides or competes), in addition to monetary damages and reasonable attorneys' fees as provided in this Agreement.

10. Blue-Pencil / Partial Enforcement

If any provision of this Agreement is held overbroad, the Parties expressly authorize the court to modify the provision to the minimum extent necessary to render it reasonable and enforceable under Tennessee law, and as so modified, the provision shall be enforced. Allright Auto Parks, Inc. v. Berry, 219 Tenn. 280, 409 S.W.2d 361 (1966); Vantage Technology, LLC v. Cross, 17 S.W.3d 637 (Tenn. Ct. App. 1999).

11. Governing Law and Forum

This Agreement is governed by the laws of the State of Tennessee. Exclusive forum: Chancery Court for [______] County, Tennessee.

12. Severability; Entire Agreement; Counterparts

If any provision is held unenforceable, the remaining provisions remain in effect. This Agreement is the entire agreement of the Parties on its subject matter. Executable in counterparts including electronic signatures.

13. Signatures

Part C — Pre-Signing Checklist

☐ Determined whether Employee is a "healthcare provider" under T.C.A. § 63-1-148
☐ If healthcare provider: confirmed writing signed by both parties
☐ If healthcare provider: limited duration to ≤ 2 years
☐ If healthcare provider: limited geographic scope to ≤ 10-mile radius OR county of practice OR facility-based restriction (no geographic limit)
☐ If hospital/dialysis/faculty plan/nursing home: verified additional § 63-1-148 limits
☐ Identified "special facts" / legitimate protectable interest (Hasty) — trade secrets / customer relationships / training investment / goodwill
☐ Defined "Competitive Business" with specificity — not the entire industry
☐ Defined "Restricted Role" by reference to actual employee duties
☐ Narrowed geographic scope to areas of actual employee activity and customer contact
☐ Limited duration to no more than [_____] months (typically 6–24)
☐ Documented consideration: initial employment OR continued at-will (with intent that "appreciable length of time" will elapse) OR independent consideration (raise/bonus/promotion/equity)
☐ Paired covenant with NDA / trade-secret covenant (Tennessee UTSA, T.C.A. § 47-25-1701 et seq.) and narrow non-solicit
☐ Included blue-pencil / partial enforcement clause
☐ Specified Tennessee governing law and Chancery Court forum
☐ Provided Employee reasonable opportunity to review and consult counsel
☐ Retained executed original; provided executed copy to Employee
☐ Calendared termination-event re-review (re-assess enforceability before sending cease-and-desist or filing suit)

Sources and References

• T.C.A. § 63-1-148 (Covenants not to compete; healthcare providers) — https://law.justia.com/codes/tennessee/title-63/chapter-1/part-1/section-63-1-148/
• Allright Auto Parks, Inc. v. Berry, 219 Tenn. 280, 409 S.W.2d 361 (1966)
• Hasty v. Rent-A-Driver, Inc., 671 S.W.2d 471 (Tenn. 1984)
• Vantage Technology, LLC v. Cross, 17 S.W.3d 637 (Tenn. Ct. App. 1999)
• Murfreesboro Med. Clinic, P.A. v. Udom, 166 S.W.3d 674 (Tenn. 2005)
• Central Adjustment Bureau, Inc. v. Ingram, 678 S.W.2d 28 (Tenn. 1984)
• Tennessee Uniform Trade Secrets Act, T.C.A. § 47-25-1701 et seq. — https://law.justia.com/codes/tennessee/title-47/chapter-25/part-17/
• Tennessee State Courts — Chancery Court information — https://www.tncourts.gov/courts/chancery-courts
• Tennessee Bar Association non-compete resources — https://www.tba.org/
• Disclaimer: This template does not constitute legal advice. Consult licensed Tennessee counsel.