Are Non-Compete Agreements Enforceable?

By Jedidiah McKeehan

At some point you may have gone to work somewhere and one contingency of the employer offering you a job is that you sign a non-compete agreement.

A non-compete agreement usually contains language in it that states you are agreeing that if you leave this job you will not use your knowledge you have acquired in your employment to go out and try to compete for that same business with a different company.

For example, one case I had that involved non-compete agreements involved hairstylists.  Two hairstylists left their previous employer and opened up their own hairstyling business.

Their previous employer had made them sign non-compete agreements to prevent its employers from leaving and taking their regular customers with them.  These hairstylists sought to determine whether they had violated their non-compete agreements.

Other professions where a non-compete agreement may come into play are financial advisors, architects, and inside sales employees.  Employers do not want these individuals leaving their employment and competing against them, and potentially taking clients of the business with them.

What is an example of non-compete agreement language?  Well, a non-compete agreement for hairstylists might say, “you cannot work at another hairstylist or hair cutting business with 20 miles of the location of the employer for a period of 2 years.”

What does Tennessee law say about non-compete agreements?  In Tennessee, non-compete agreements are disfavored because they are considered a hindrance to people making a living and support themselves and their families.

If a non-compete agreement exists, then the language of that agreement is to be construed strictly for the employee.  That means that if there is any ambiguity, the contract is interpreted for the employee.

Further, Tennessee law states that if a non-compete agreement is deemed enforceable, then the restrictions must be reasonable regarding time and territorial limits, and those restrictions must be no greater than is necessary to protect the business interest of the employer.

If the agreement is not reasonable, then the courts will rule that the non-compete agreement is unenforceable.  So, is a non-compete agreement that prevents a hairstylist from cutting hair within 20 miles for 2 years reasonable?  My opinion is that does not seem reasonable and would likely be unenforceable.

When you think about it, a 20-mile radius from the employer’s location is a long ways.  That basically means that the hairstylist would have to move or commute to another town to remain a hairstylist and would have to do so for 2 years.

So, are non-compete agreements enforceable?  Yes, but they have to be reasonable in the restrictions they impose and any court ruling on one is operating from the position that non-compete agreements are disfavored.

 

Jedidiah McKeehan is an attorney practicing in Knox County and surrounding counties.  He works in many areas, including criminal, personal injury, landlord-tenant, probate, and estate planning. Visit attorney-knoxville.com for more information about this legal issue and other legal issues.

 

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