Key Takeaways

• Effective July 1, 2026, employers in Tennessee are prohibited from requiring, requesting, or enforcing noncompete agreements against employees earning less than $70,000 in annualized compensation.
• The new law applies to noncompete agreements entered into, renewed, or amended on or after July 1, 2026.
• Clauses restricting competition for two years or less are generally presumed reasonable under the law.
• The statute gives courts the authority to modify noncompetes to ensure compliance with the law.
• The new statute applies to noncompete agreements with both employees and independent contractors.

Tennessee HB1034 is joining the nationwide trend of limiting the enforceability of noncompete agreements for employees earning less than $70,000 – but also adding limited presumptions of enforceability for workers earning above the threshold. After Virginia and Washington enacted legislation banning or significantly restricting noncompetes, Tennessee Gov. Bill Lee followed suit by signing House Bill 1034, which takes effect July 1.

Compensation Threshold

Most notably, the new statute prohibits employers from requiring or requesting a noncompete agreement from, or enforcing one against, an employee whose annualized compensation is less than $70,000. The statute defines annualized compensation broadly to include wages, salary, commissions, nondiscretionary bonuses and other forms of remuneration. For hourly employees, annualized compensation is calculated by multiplying...

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