As of July 1, 2026, Tennessee employers face a significantly different legal landscape for noncompete agreements.
On May 7, 2026, Gov. Bill Lee signed legislation that materially reforms Tennessee’s approach to restrictive covenants. The law is now in effect and applies to all noncompete agreements entered into, renewed, or amended on or after July 1, 2026. For many employers, this means that agreements currently in circulation may need to be revised before they are used again with new hires, promotions, compensation adjustments, or contract renewals.
The legislation provides greater certainty regarding the enforceability of noncompete agreements but also imposes meaningful new restrictions, including a prohibition on noncompetes for employees earning less than $70,000 annually.
As we described in detail earlier this year, the new law creates statutory presumptions regarding the reasonableness of a noncompete’s duration.
For traditional employment relationships, a noncompete lasting two years or less after termination is presumed reasonable. Restrictive covenants exceeding two years are presumed unreasonable.
The law also establishes separate presumptions for franchise, distribution, and similar business relationships, as well as transactions involving the sale of a business.
Perhaps more significantly, Tennessee now has joined a growing number of states in prohibiting the use of noncompetes for lower-wage workers.
Beginning July 1, 2026, employers may not...
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