How to Protect Confidential Business Information in Tennessee

by Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

A dilemma employers often face when key employees leave and join a competitor is how to stop the employee from taking and misusing the employer’s confidential business information. In Tennessee, such questions are answered, primarily, by the Tennessee Uniform Trade Secrets Act (TUTSA), T.C.A. § 47-25-1701, et seq.. Currently, 47 states have adopted a form of the uniform act (Massachusetts, New York and North Carolina are the holdouts; Texas adopted the act effective on September 1, 2013). The act is designed to bring some semblance of order to the myriad approaches states have taken to protecting trade secrets and defining claims for misappropriation of trade secrets.

This post address two related questions in light of recent developments in Tennessee: 1) What is the status of confidential information that does not meet the threshold of a “trade secret?” 2) What is the impact of TUTSA on other claims related to unfair competition?

Employers often adopt policies that prohibit employees from disclosing or misusing “confidential information.” In such policies, employers have a tendency to cast a wide net; with the concept of confidential information often defined to include virtually all information about customers, vendors, sales, marketing, finances, and proprietary and secret processes.

Employers also often require employees to sign agreements restricting what the employees can do once they leave employment, such as agreements not to compete, not to solicit certain customers or employees, and/or not to disclose confidential information. Before they will enforce such agreements, Tennessee courts require employers to prove that they have some special interest over and above ordinary competition in which—without the protection sought in these contractual restrictions—the employee would gain an unfair advantage in competition with the employer. The protectable interests most often used to justify these types of restrictive covenants are specialized training, the need to protect trade secrets, and circumstances in which the employee has become the “face” of the employer to its customers.

Tennessee courts define “confidential information” more narrowly than many employers’ policies do. In Tennessee, according to a 1990 Tennessee Court of Appeals case, “confidential business information is akin to trade secrets.” Heyer-Jordan & Assocs., Inc. v. Jordan. As defined by TUTSA:

Trade Secret means information, without regard to form, including, but not limited to, technical, nontechnical or financial data, a formula, pattern, compilation, program, device, method, technique, process or plan that: (A) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use; and (B) Is the subject of efforts that are reasonable under the circumstances to maintain secrecy.

T.C.A. § 47-25-1702(4)

TUTSA also has the effect of occupying almost the entire field of legal claims for unfair competition that are related in any way to an employee’s misuse of confidential information.  According to the express language of the statute, TUTSA “displaces conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret.” TUTSA “does not affect contractual remedies.” T.C.A. § 47-25-1708.

Tennessee appellate courts have not yet had the opportunity to address TUTSA preemption. Nevertheless, one of the most influential opinions in the country, Hauck Manufacturing Co. v. ASTEC Industries, Inc., was authored by federal District Judge Collier in the Eastern District of Tennessee in Chattanooga. In this case involving TUTSA, Judge Collier took the opportunity to review cases from a variety of states interpreting their versions of the Uniform Trade Secrets Act.

Judge Collier found that TUTSA has a broad sweep. If the information at issue is a trade secret, then any other claim based on the information is preempted. If the information is not a trade secret, then a party has no legal interest upon which to base a claim. Thus, under Hauck, save for claims based upon a contract, no claim that is based on misuse of confidential information exists in Tennessee outside of TUTSA. Indeed, this is true regardless of whether the claim is based “in whole or in part” on the misuse of confidential information.

Since Judge Collier’s decision, courts in Tennessee have found a variety of claims in the unfair competition context to be preempted. Most recently, Judge Binkley in the Fifth Circuit Court in Davidson County, in Ram Tool & Supply Co., Inc. v. HD Supply Construction Supply, Ltd., adopted Judge Collier’s reasoning to dismiss state court claims of breach of fiduciary duty, intentional interference with business relations, and civil conspiracy.

As mentioned above, TUTSA expressly exempts contract claims from their preemptive reach. This exemption, combined with the principle that an employer may assert a protectable interest in trade secret information to justify a restrictive covenant, may give rise to somewhat strange results. To justify a non-disclosure provision in a contract based upon the protectable interest of confidential business information, that information must be the equivalent of a trade secret. But, once that threshold is met, the employer can use the contract to restrict the employee from disclosing confidential information that is not a trade secret.

The upshot of these cases decided under TUTSA is that most non-contract claims that employers traditionally have made in unfair competition cases will no longer be viable if the employee, as part of his alleged wrongdoing, misused confidential information. Against this backdrop, there are some steps employers can take to protect business information from misuse.

  1. Because TUTSA exempts contracts from their preemptive reach, if an employer has a special interest that is worthy of protection (including a trade secret) sufficient to justify a restriction on competition, solicitation, and/or disclosure, the employer can require an employee to sign an agreement that the employee will not disclose any “confidential” information, even if not all of the information would qualify as a trade secret.
  2. Even without an agreement, if the employee misuses confidential information (i.e. misappropriates trade secrets), the employer can sue the employee for a violation of TUTSA. The key limitation on such an action is that the employer will have to prove that the information involved meets the statutory definition of a trade secret.
  3. To ensure that confidential information meets the definition of a trade secret, employers must take reasonable steps to protect the confidentiality of the information. In this electronic age, that includes such steps as computer and Internet use policies that instruct employees on the use of such information, including narrowly drawn definitions of what constitutes confidential information; password protection of company laptops and mobile devices; email and database encryption; and the ability to wipe devices that are lost or stolen.



DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ogletree, Deakins, Nash, Smoak & Stewart, P.C. | Attorney Advertising

Written by:

Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

Ogletree, Deakins, Nash, Smoak & Stewart, P.C. on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.