Non-Compete Agreements in Tennessee

This is general information, not legal advice. A Tennessee employment attorney can help with your specific situation.

The Pre-2026 Standard: Common-Law Reasonableness

Until recently, non-compete agreements in Tennessee were governed primarily by T.C.A. § 47-50-112 and a body of common law built around a reasonableness test. Under that standard, a non-compete was enforceable only if it protected a legitimate business interest — such as trade secrets, confidential customer relationships, or specialized training — and only to the extent that its restrictions were no broader than necessary.

Courts evaluated three dimensions:

• Geographic scope: Was the territory restricted (a city, a state, a multi-state region) proportionate to where the employer actually operated and where the employee had meaningful customer contact?
• Duration: Was the time restriction (6 months, 1 year, 2 years, longer) reasonable given the nature of the business and the employee’s role?
• Activity restricted: Did the agreement prohibit only the type of work the employee actually did for the employer, or did it sweep up unrelated activities?

Tennessee courts could narrow (“blue pencil”) an overly broad non-compete in some circumstances rather than throwing it out entirely, though this was not always done. An agreement that failed all three prongs was typically unenforceable.

This common-law standard still applies to agreements entered into before July 1, 2026, and to agreements with employees above the $70,000 threshold.

The 2026 Reform: HB 1034

HB 1034, signed by the Governor on May 7, 2026, and effective July 1, 2026, makes a significant structural change to how non-compete agreements are handled in Tennessee.

The $70,000 ban: Employers are prohibited from requiring, requesting, or enforcing a non-compete agreement against any employee whose annualized compensation is less than $70,000. An agreement that purports to bind an employee earning under that threshold is unenforceable as a matter of law — it does not matter how it is worded or what business interest the employer claims to be protecting.

The 2-year presumption: For non-compete agreements that are otherwise covered by the new law (employees and independent contractors above the compensation threshold), a duration of 2 years or less is presumed to be reasonable. This is a rebuttable presumption — a longer duration could still be challenged, and an employer could theoretically argue for one longer than 2 years in appropriate circumstances — but the burden shifts when a short-duration agreement is at issue.

Scope of the new law: HB 1034 applies only to agreements executed, renewed, or modified on or after July 1, 2026. Agreements signed before that date remain governed by the prior common-law standard, regardless of the employee’s compensation level.

What Employers Could Use Instead for Under-$70K Workers

Even with the new law, employers can still use other types of restrictive covenants for lower-wage employees, provided those agreements are independently reasonable and supported by adequate consideration:

• Non-disclosure agreements (NDAs): Protecting genuinely confidential information and trade secrets remains permissible. Tennessee’s Uniform Trade Secrets Act independently protects trade secrets from misappropriation.
• Non-solicitation of customers: Narrowly drafted agreements restricting the employee from soliciting specific customers they personally served may still be enforceable.
• Non-solicitation of employees: Restrictions on recruiting former colleagues are generally treated separately from non-competes and may still be used.

Practical Takeaways

Employees signing new agreements on or after July 1, 2026 should check whether their annualized compensation exceeds $70,000. If not, any non-compete clause in the agreement is unenforceable under the new law — though NDAs and non-solicitation clauses in the same document may still apply.

Employers had until July 1, 2026 to audit existing and template agreements to align with the new law. Agreements with employees above the threshold still benefit from the 2-year reasonableness presumption but should still be tailored to protect legitimate business interests rather than broadly restricting competition.

For related topics, see the Tennessee Employment Law hub.