Tennessee has just adopted a new framework for noncompete agreements.
On May 7, 2026, Tennessee Governor Bill Lee signed into law House Bill 1034, as amended. The new statute goes into effect on July 1, 2026, and will apply to any agreement entered into, renewed or amended on or after that date. Employers with workers in Tennessee should immediately familiarize themselves with the new requirements. The new law:
- Sets a compensation threshold, rendering void and unenforceable any noncompete agreement with employees whose annualized compensation (inclusive of wages, salary, commissions, nondiscretionary bonuses, and other forms of remuneration) is less than $70,000. Also specifies that annual compensation for an hourly employee must be calculated by multiplying the employee’s hourly rate by forty (40) and multiplying the product by fifty-two (52).
- Creates rebuttable statutory presumptions, including that restrictive covenants with employees and independent contractors — outside the sale of business interest context –are reasonable in temporal scope if 2 years or less in duration, and unreasonable if longer.
- Shifts the statutory presumption to 3 years or less for distributors, dealers, franchisees, lessees and licensees.
- In the sale of business interest context, shifts the statutory presumption to 5 years or less, or a period equal to the time during which payments are made to the owner or seller.
- Clarifies that the presumptions of reasonableness do not prohibit an employer from enforcing a confidentiality agreement, customer non-solicitation agreement, or employee non-solicitation agreement.
- Gives courts the ability to modify a restrictive covenant to render it reasonable and enforceable.
Tennessee thus is joining the nationwide trend toward restricting the enforceability of noncompetes. With the effective date less than two months away, employers with Tennessee workers should waste no time in evaluating and potentially revising their noncompete agreements and policies.
