Covenants not to compete are a common part of the employment relationship. The recent decision by the Tennessee Court of Appeals in Combs v. Brick Acquisition Company is instructive on when a covenant not to compete will be enforced.
In Tennessee a covenant not to compete is enforceable if there is a legitimate business interest to be protected and the time and territorial limitations of the non-compete are reasonable. In determining whether a non-compete is reasonable a court will consider the following:
- The consideration supporting the non-compete;
- The threatened danger to the employer in the absence of the non-compete;
- The economic hardship imposed on the employee by the non-compete and;
- Whether the non-compete is inimical to the public interest.
In Combs the decision turned on whether the employer could show a legitimate business interest to be protected. In determining whether a legitimate protectable business interest exists Tennessee Courts consider the following:
- Whether the employer provided the employee with specialized training;
- Whether the employee is given access to trade or business secrets or other confidential information; and
- Whether the employer’s customers tend to associate the employer’s business with the employee due to the employee’s repeated contacts with the customers on behalf of the employer. This third element is often referred to as the employee being the “face of the business”.
These considerations may operate individually or in combination to create a legitimate protectable business interest.
In Combs the Court held that because Mr. Combs had access to confidential pricing and profit margin information and was the sole commercial brick salesperson for the company in the Chattanooga area the employer had a legitimate protectable business interest. Therefore, the non-compete was enforced.
If you have questions about the enforceability of a non-compete consult your lawyer.