Picture this: Your star sales rep jumps ship to join your primary competitor. Is your noncompete enforceable? What about other restrictive covenants? Tennessee’s new law, effective July 1, 2026, will sharpen answers to these questions.
Over the past few years, some states and the Federal Trade Commission have become increasingly skeptical about the enforceability of noncompetes. Tennessee’s new law doesn’t fully embrace that skepticism. But it creates new boundaries that will add some clarity to the Volunteer State’s longstanding “reasonableness” test.
What’s changing? Two big changes will apply to agreements entered into, renewed, or amended on or after July 1, 2026. First, new noncompetes are void for any employee whose annualized compensation is less than $70,000. Second, the new law creates rebuttable presumptions about the reasonableness of the time limits.
Does this new law apply to agreements existing before July 1? No. Existing agreements will not be affected by this new law unless, for example, they auto-renew on or after that date. Agreements with effective dates before July 1 will be reviewed under Tennessee’s existing rubric of reasonableness.
Does the new law kill all noncompetes? No. The only noncompetes that will be DOA are those with an effective date on or after July 1 that are sought to be enforced against an employee whose annualized compensation is less than $70,000.
What counts toward the $70,000 annualized compensation threshold? Basically...
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