## Facts

- Central Adjustment Bureau, Inc. (CAB) operated a nationwide debt-collection business, including a Nashville office, in a highly competitive industry.
- Henry Preston Ingram and other individual defendants worked for CAB in Nashville and signed employment contracts containing covenants not to compete.
- The noncompetition covenants were presented and signed after employment began; at least one employee signed after being told employment would end if he refused.
- In 1979, the individual defendants left CAB and formed Ingram & Associates, Inc., a competing collection agency.
- CAB alleged the defendants took and used confidential client information and customer relationships to compete.
- CAB sued for injunctive relief and damages for breach of the noncompetition covenants and for torts including unfair competition and breach of the duty of loyalty.
- The trial court found the covenants overbroad in time and geographic scope, modified them to reasonable limits, enjoined competition under the modified terms, and awarded CAB $80,000 in damages.

## Issues

1. Whether a covenant not to compete signed after employment begins is supported by consideration when the employee continues working for an appreciable time after signing.
2. Whether a court may modify an overbroad noncompetition covenant’s time and geographic limits and enforce the covenant as modified rather than invalidating it entirely.

## Decision

- The Tennessee Supreme Court reversed the Court of Appeals and affirmed the trial court’s judgment enforcing the covenants as modified.
- The Court held the post-hire covenants were supported by consideration based on continued employment for an appreciable period after signing, along with employment-related benefits such as promotions and pay increases, where employees later left voluntarily and no employer bad faith was shown.
- The Court held Tennessee courts may equitably modify unreasonable time and geographic restrictions and enforce the restraint within reasonable bounds.
- Injunctive relief enforcing the modified covenants and the $80,000 damages award were sustained; tort liability was not before the Court on review.

## Legal Principles

- Continued employment for an appreciable period after signing can constitute sufficient consideration for a covenant not to compete executed after the employment relationship begins, particularly when the employee resigns voluntarily and the employer has not acted in bad faith.
- Courts evaluating restrictive covenants apply a reasonableness analysis that balances the employer’s legitimate protectable interests, the employee’s ability to earn a living, and the public interest.
- An overbroad covenant not to compete may be judicially modified to reasonable temporal and geographic limits and enforced as modified, rather than voided in full, when doing so reasonably protects legitimate business interests.

## Conclusion

The Tennessee Supreme Court upheld enforcement of post-hire noncompetition covenants supported by continued employment and approved equitable judicial modification of overbroad restrictions, affirming an injunction and damages based on the covenants as narrowed to reasonable limits.


Cent. Adjustment Bureau, Inc. v. Ingram, 678 S.W.2d 28 (Tenn. 1984)