Court reviews whether a non-compete contract is enforceable for an at-will employee who allegedy signed it under duress

CUMMINGS INCORPORATED v. TERRY J. DORGAN, JR. (Tenn. Ct. App. September 24, 2009)

This appeal involves an employment agreement and a non-compete covenant. The defendant sales representative was employed as a salesperson by the employer sign company. The parties executed an agreement setting out the structure of the employee's compensation, to be effective for three years. Prior to the expiration of the agreement, the plaintiff employer asked the employee to sign a new contract, changing his pay from straight commissions to salary plus commissions, as well as a separate two-year non-compete contract. The employee initially declined to sign the new contracts, but ultimately did so because he was told that he would be terminated if he refused. Over a year later, the employee quit to work for one of the plaintiff's competitors, and began soliciting his previous employer's largest account. The employer filed this lawsuit to enforce the non-compete contract. The employee asserted that the non-compete contract was unenforceable and filed a counterclaim, alleging breach of contract.

After a bench trial, the trial court enforced the non-compete contract, but held that the new compensation contract, executed on threat of termination, was void because it was signed under duress. The trial court awarded the employee damages. The employer now appeals, arguing that the new compensation contract was not signed under duress. The employee argues on appeal that the non-compete contract is unenforceable, because it was not supported by consideration and was also signed under duress.

We find that the defendant employee was an employee-at-will of the plaintiff company. On this basis, we reverse the trial court's finding that the new compensation contract was signed under duress, because threatening an at-will employee with termination does not constitute duress under the circumstances. We affirm the trial court's holding that the non-compete contract was enforceable.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2009/dorgant_092409.pdf

Court reviews enforceability of non-compete covenants for therapists

COLUMBUS MEDICAL SERVICES, LLC v. DAVID THOMAS AND LIBERTY HEALTHCARE CORPORATION

COLUMBUS MEDICAL SERVICES, LLC v. M. B. "JUN" PACRIS, JR., LYNNA JARDELEZA DAWN LOCKE, MARIA MADARANG, STEPHEN MONISIT, LIZA PABALATE, CANDI McMORRAN, MONICA ROBERTS, AND KIMBERLY CRAWFORD (Tenn. Ct. App. August 13, 2009)

(Consolidated Appeal)

This appeal involves a claim of tortious inducement to breach a non-compete covenant in an employment agreement. The plaintiff staffing agency employed the defendant therapists at a State residential care facility for severely disabled persons. The plaintiff agency staffed the facility under an exclusive contract which was set to expire by its own terms in June 2003. The therapists had executed restrictive covenants in their employment agreements with the plaintiff staffing agency under which they were prohibited from working at the State facility for one year after the termination of their employment with the plaintiff. The State requested bids to staff the facility under a new contract. Through the bidding process, the defendant staffing agency was awarded the contract. The defendant agency then met with the defendant therapists (who were incumbent employees), staffed through the plaintiff agency, and offered to hire them to continue working at the facility. The defendant staffing agency was aware of the non-compete covenants and agreed to indemnify the defendant therapists if the plaintiff staffing agency tried to enforce the covenants. The defendant therapists accepted positions with the defendant agency and continued working at the facility.

The plaintiff agency filed this lawsuit against the individual defendant therapists and the defendant agency. After a bench trial, the trial court concluded that the non-compete covenants were enforceable, that the defendant therapists had breached their covenants, and that the defendant staffing agency had tortiously induced the individual defendant therapists to breach their employment contracts. The defendants now appeal. We reverse, concluding that, while the plaintiff agency had a legitimate protectable business interest, the noncompete covenants are not enforceable in light of the hardship to the defendant therapists and the adverse impact on the public interest.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2009/columbusmed_081309.pdf