On May 7, 2026, Tennessee Governor Bill Lee signed House Bill 1034 into law, establishing the state's first statutory framework governing noncompete agreements. Effective July 1,…
On May 7, 2026, Tennessee Governor Bill Lee signed House Bill 1034 into law, establishing the state's first statutory framework governing noncompete agreements. Effective July 1, 2026, the legislation marks a significant departure from Tennessee's prior reliance on common law principles to evaluate restrictive covenants. Employers with operations or personnel in Tennessee should begin assessing the implications of this new framework well in advance of the effective date, as the law introduces both a categorical wage-based prohibition and a series of duration presumptions that will reshape enforcement standards across the state.
Under House Bill 1034, employers are prohibited from requesting, requiring, or enforcing noncompete agreements against Tennessee employees earning less than $70,000 annually. This threshold removes a substantial portion of the workforce from the scope of permissible noncompete restrictions and signals a clear legislative intent to limit the use of such agreements among lower-wage workers. Employers that have historically relied on broad noncompete templates across their workforce will need to revisit their practices to ensure compliance with the wage threshold beginning July 1, 2026.
The law also introduces reasonableness presumptions tied to the type of relationship at issue. Noncompete restrictions of up to two years are presumed reasonable for employees and independent contractors, while restrictions of up to three years are presumed reasonable for certain distributors and franchisees. Longer durations are presumed reasonable in the context of the sale of a business. These presumptions shift the burden of proof in enforcement disputes and provide employers with clearer guideposts when drafting and defending restrictive covenants.
In light of these changes, employers with Tennessee workforces should take proactive steps before July 1, 2026. Recommended actions include conducting a thorough audit of existing noncompete agreements, revising standard templates to align with the new wage threshold and duration presumptions, and reassessing enforcement strategies in light of the shifted evidentiary landscape. Hiring practices, onboarding documents, and severance arrangements should also be reviewed to confirm consistency with the statute.
This article is intended for general informational purposes only and does not constitute legal advice. Employers should consult qualified counsel for guidance tailored to their specific circumstances and agreements.