Published on:

Tennessee Non-Competition Agreements: The Argument that a Salesperson Has Become the “Face of the Company”

When a Tennessee company attempts to enforce a non-compete or non-solicitation agreement against a former employee or independent contractor who served in a sales or marketing capacity, it is almost certain that the company will allege that the former representative had become the “face of the company” to that company’s customers. If the company can prove that argument, it is highly likely that its non-compete or non-solicitation agreement will be upheld.

Not all non-competition and non-solicitation agreements are enforceable in Tennessee, and many have been held to be unenforceable. In order to be able to enforce such agreements, a company must be able to show that it has a “protectable interest.”  To have a protectable interest, a company must show that the former employee’s or contractor’s relationship and work with the company puts the person in the position to do more than just engage in ordinary competition against the company.  The company for whom the former salesperson worked must prove that the relationship put the former salesperson in a position that gives that person an unfair competitive advantage over the company.

Under Tennessee law, a court must look to several factors to determine whether the former employer has a protectable interest such that a non-compete or non-solicitation agreement is enforceable. One of those factors is whether the former employee, by virtue of the goodwill of the former employer, had developed “special relationships” with the former employer’s customers such that the former salesperson was so closely associated with the former employer that he or she had become the “face of the company” to those customers.

To understand how Tennessee courts analyze the “face of the company” factor, it is helpful to look at a few Tennessee non-compete cases.

CASES WHERE FORMER EMPLOYEE FOUND TO BE THE “FACE OF THE COMPANY”

Combs v. Brick Acquisition Co., 2013 WL 5872448 (Tenn. Ct. App. 2013): The court found that a commercial brick salesperson whose territory included the Chattanooga area, and who was the only salesperson for that area for 7 years, had become the face of his former employer’s business to its customers. The court concluded that the company’s customers associated the company’s business directly with the former employee because of his “repeated contacts” with them for so many years.

Intermodal Cartage Co., Inc. v. Cherry, 227 S.W.3d 580 (Tenn. Ct. App. 2007):  In this case, the trial court found that one of the former employees, a defendant named Cherry, did not have such a close relationship with his former employer’s customers that he had become the face of the company. The trial court granted Cherry a summary judgment. The Court of Appeals reversed. After leaving his former employer, Cherry was able to obtain the business of several of his former employer’s customers whom he had worked with directly.  The Court of Appeals, in reversing the trial court, relied on the testimony of representatives of the customers at issue. Their testimony established that Cherry had developed close relationships with them and that those relationships, and the accompanying trust which was developed, made Cherry the face of the company.

Hangar Prosthetics & Orthotics East, Inc. v. Kitchens, 280 S.W.3d 192 (Tenn. Ct. App. 2008) In this case, the former employee was paid to spend time in area hospitals developing relationships with physicians. Physicians were the sole source of referrals of the business and the former employee was virtually the only employee present in the area hospitals who was tasked with developing those relationships.

CASES WHERE FORMER EMPLOYEE HELD NOT TO BE THE “FACE OF THE COMPANY”    

Corbin v. Tom Lange Co., Inc., 2003 WL 22843167 (Tenn. Ct. App. 2003):  In this case, the former employer was in the business of buying and selling produce.  The former employee’s job duties as a salesperson required him to do most of his business over the phone. He dealt with approximately 6 customers daily. Most significantly to the court, any given customer normally worked with several salespersons because, to complete a sale, the first salesperson would have to hand the phone call off to a second salesperson who would have to hand it off to a third. The court found that the “tag team” approach diluted the importance of the relationship of any one salesperson with a customer.

Hinson v. O’Rourke, 2015 WL 5033908 (Tenn. Ct. App. 2015): The former employer’s business consisted of hosting live entertainment events at bars and restaurants. The former employee was a “DJ” for his former employer. The former employee quit and began hosting events at the very same bars and restaurants where he had been doing so while employed by the former employer.  The Court of Appeals affirmed the trial court’s finding that the former employee was not the face of his former employer’s business in any respect.

_______________________________

Tennessee lawyers who handle non-compete and non-solicitation cases must remember that the “face of the company” factor is just one of the factors a court is required to consider in determining whether a protectable interest exists. The others are: (1) whether the former employer provided the former employee with specialized training; and (2) whether the former employee was given access to trade secrets or other confidential information.