## Facts

- Columbus Medical Services, LLC (Columbus) was a staffing agency with an exclusive State of Tennessee contract to recruit and supply therapists to Arlington Developmental Center (Arlington), a residential facility serving persons with severe disabilities.
- Columbus recruited, placed, and in some instances relocated therapists to work at Arlington, and it negotiated the therapists’ working conditions with the State and the facility.
- Therapists hired through Columbus signed employment agreements containing a restrictive covenant that barred them from working at Arlington for one year after their employment with Columbus ended.
- Columbus did not fund the specialized training required for the Arlington positions; that training was provided through the State or the facility.
- When the State rebid the staffing contract, it awarded the next contract to a competitor, Liberty Healthcare Corporation (Liberty).
- Arlington wanted continuity of care and encouraged Liberty to recruit the therapists already working there under Columbus’s contract.
- Liberty hired nine of Columbus’s former therapists to continue working at Arlington within one year after they left Columbus, despite knowing about the restrictive covenants.
- Columbus sued the therapists for breach of the noncompete provisions and sued Liberty for tortious inducement of breach of contract.
- After a bench trial, the trial court found the covenants enforceable, found breaches by the therapists, found Liberty liable for inducement, and granted relief to Columbus.
- The therapists and Liberty appealed, arguing the restrictive covenants were unenforceable under Tennessee law.

## Issues

1. Whether the noncompete provisions barring Columbus’s former therapists from working at Arlington for one year were enforceable under Tennessee law, considering Columbus’s claimed protectable interests, hardship to the therapists, and the public interest in continuity of care at a state facility.

## Decision

- The Tennessee Court of Appeals reversed the trial court’s judgment.
- The court held that, although Columbus showed a legitimate protectable business interest (including investment in recruiting/placement and goodwill), the restrictive covenants were unenforceable when balanced against the hardship to the therapists and the negative effect on the public interest in continued care for Arlington’s residents.
- Because the noncompetes were unenforceable, the therapists were not liable for breach of those provisions.
- For the same reason, Liberty was not liable for tortious inducement to breach the noncompete provisions.
- The case was remanded for further proceedings consistent with the appellate ruling.

## Legal Principles

- Noncompete covenants in employment agreements are disfavored in Tennessee and are construed strictly in favor of the employee.
- A restrictive covenant is enforceable only to the extent necessary to protect an employer’s legitimate business interest; it must be reasonable in scope and duration and must not harm the public interest.
- In evaluating enforceability, Tennessee courts weigh (a) the employer’s protectable interest (such as special training paid for by the employer, confidential information, or goodwill created through the employment), (b) the hardship on the employee, and (c) the effect on the public.
- Even when the time period appears facially reasonable (here, one year), a restriction tied to a particular workplace can be unreasonable in practice if it effectively forces employees out of specialized work and disrupts established professional relationships.
- A claim for tortious inducement to breach a contract requires an enforceable contractual obligation; inducement liability cannot rest on interference with an unenforceable restrictive covenant.

## Conclusion

The Tennessee Court of Appeals reversed the trial court and held that Columbus’s one-year restriction preventing former therapists from working at Arlington was unenforceable because, despite Columbus’s legitimate interest in its recruiting investment and goodwill, the covenants imposed substantial hardship on the therapists and conflicted with the public interest in continuity of care for severely disabled residents; accordingly, neither the therapists nor Liberty could be held liable for breach or inducement based on those noncompetes.


Columbus Medical Services, LLC v. Thomas, 308 S.W.3d 368 (2009)