The restrictive covenant landscape continues to shift — and the latest development comes from a state that may surprise you. Tennessee, a state not typically associated with employee-friendly regulation, has moved to establish new statutory parameters for non-compete agreements. With the bill now awaiting the Governor’s signature, Tennessee employers should take notice and begin preparing for significant changes effective July 1, 2026.
Tennessee adopts non-compete restrictions
The Tennessee General Assembly has passed House Bill 1034, which amends the Tennessee Code to introduce two key changes to the law governing restrictive covenants.
First, the bill establishes statutory rebuttable presumptions for the reasonableness of time restrictions in restrictive covenants. Under the new framework, a court must presume that a time restraint exceeding the applicable statutory period is unreasonable. For former employees and independent contractors, a restraint of two years or less is presumed reasonable. For distributors, dealers, franchisees, and similar business relationships, the presumptively reasonable period is three years. For covenants tied to the sale of a business or equity interest, the presumptively reasonable period is the longer of five years or the period during which payments are made to the seller.
Importantly, the bill preserves employers’ ability to enforce confidentiality and nondisclosure agreements, client or customer non-solicitation agreements, and...
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