Non-Compete Agreements Attorneys in Murfreesboro, Tennessee

As a business owner, you want to ensure that any trade secrets that are vital to your business, such as a proprietary piece of software or a client list, don’t fall into the hands of a competitor. If you have an employee who chooses to quit and use your trade secrets to establish a competing enterprise, you may quickly find your business in jeopardy. This is why drafting a non-compete agreement for all of your employees to sign can be such a crucial decision for your business.

Is this agreement going to be enforceable should an employee leave and, say, use his former company’s customer list to market a similar product or service? In Tennessee, the answer is both yes and no. A lot will depend on how focused and carefully worded the non-compete agreement is.

If you live in or around Murfreesboro or Berry Hill, Tennessee, and you are considering a non-compete agreement for your business, or you wish to have an existing one checked for potential enforceability, contact the business law attorneys at McCarter | East PLLC today for reliable legal counsel.

What Is a Non-Compete Agreement?

A non-compete agreement is a form of a contract that prevents an employee, during a certain period of time and in a defined geographic region, from leaving to become a competitor or leaving to work for a competitor.

For instance, company A markets a specific tool needed in the manufacturing of widgets. Company A requires all employees to sign a non-compete pact. An employee works there for nine months and gets an offer from an industry competitor, Company B, which sells a similar tool. The employee decides to leave Company A and take their customer list with them to use at Company B.

Alternately, the departing employee could take the design of the tool to a competing company, or set up a competing company entirely on their own.

These scenarios are exactly what a non-compete agreement aims to prevent.

What Are the Necessary Components
of a Non-Compete Agreement?

To survive a challenge in court, a non-compete agreement must be limited and “reasonable.” If the document is too broad or restrictive – for instance, it has no time limit or no geographic limitations – the courts will likely not look favorably on it.

To help ensure the enforceability of a non-compete, these elements must be present:

• A date upon which the agreement commences. For example, upon signing it or upon the first day of work.

• A reason for enacting the agreement. For example, to protect customer data, novel marketing techniques, proprietary tools or software, or more.

• Specific dates during which the employee will be barred from working for a competitor. For example, 18 months after leaving the company (note: the longer the period, the more skeptical the courts may be).

• A location covered by the agreement. For example, anywhere across the state of Tennessee or a combination of adjoining states as well (note: the larger the area, the more skeptical the courts may be.)

• What counts as competition. For example, providing a list of competing companies, along with a clause preventing the employee from starting up their own competing company.

• Compensation, or reward, for the person who signs the agreement.

If a non-compete is required upon starting the job, courts have held that the job itself is a sufficient reward for signing the document. If an employee has already been working for the company and is suddenly asked to sign a non-compete pact, the employer should provide some kind of incentive, such as a raise or promotion.

Enforceability in Tennessee Courts

Non-compete agreements are generally not favored by the courts in Tennessee, which view them as a “restraint of trade.” Unless the departing employee committed some kind of gross or obvious breach, non-compete or restrictive covenants are not always enforceable in Tennessee.

The courts will weigh the following factors when determining the enforceability of a non-compete agreement:

• The consideration that is given for signing the non-compete agreement. For example, a new job, a raise, or a promotion.

• Danger to the employer if no agreement exists. For example, lost sales, theft of proprietary data or processes, etc.

• Economic hardship forced on the employee by the pact. For example, how long might the ex-employee be out of work because of the agreement?

• Public interest

• The scope of the restrictions outlined in the non-compete agreement, including length, geography, and job description.

An otherwise enforceable non-compete agreement can still be voided if the employer is found to have breached the contract. If the employer fails to pay overtime, delays or skips commission checks, foregoes a promised bonus, or asks the employee to engage in illegal conduct such as fraud, the agreement can be ruled invalid.

Hire a Skilled Non-Compete Agreement
Attorney in Murfreesboro, Tennessee

It’s clear from the above discussion of requirements — and pitfalls — that crafting an enforceable non-compete agreement is far from a simple and straightforward process. Having the guidance and input of knowledgeable business law attorneys familiar with the drafting of non-compete agreements can make all the difference in your case. When you choose to work with the experienced non-compete agreement attorneys at McCarter | East PLLC, we believe you’ll increase your chances of successfully drafting a non-compete agreement that can survive any court challenges.