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.

What Changed?

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 require, request, or enforce a noncompete agreement against a Tennessee employee whose annualized compensation is less than $70,000. Any noncompete entered into in violation of the statute is void and unenforceable as a matter of public policy. Note that annualized compensation is the “total compensation an employee earns from an employer, including wages, salary, commissions, nondiscretionary bonuses, and other forms of remuneration, calculated on an annualized basis.”

Existing Agreements Are Not Necessarily Grandfathered

One aspect of the new law that employers should not overlook is its effective-date language.

The statute applies not only to agreements entered into after July 1, 2026, but also to agreements that are renewed or amended after that date.

This means an employer could inadvertently render an older, otherwise enforceable restrictive covenant agreement unenforceable by amending it on or after July 1, 2026, which makes it subject to review under the new law.

As employers conduct routine HR and compensation activities throughout the year, they should be mindful of whether those actions constitute an amendment or renewal that could trigger application of the new statute and seek legal advice before taking action.

Confidentiality and Non-solicitation Agreements Remain Critical

Employers continue to have other ways to protect their business interests. The new law expressly preserves the enforceability of:

• Confidentiality and nondisclosure agreements;
• Customer and client non-solicitation agreements; and
• Employee non-solicitation agreements.

For employees who fall below the $70,000 compensation threshold, these agreements will be important tools for protecting customer relationships, confidential information, trade secrets, and workforce stability.

Employers should evaluate whether their confidentiality and non-solicitation provisions are robust enough to provide protection in situations where a noncompete may no longer be available.

Action Items for Tennessee Employers

With the law now effective, employers should take immediate steps to review their restrictive covenant practices, including:

1. Audit Existing Agreements

Identify all employment agreements, offer letters, incentive plans, equity agreements, and standalone restrictive covenant agreements that contain noncompetes and evaluate enforceability.

2. Review Compensation Thresholds

Determine whether employees subject to noncompetes meet the new $70,000 annualized compensation requirement.

3. Update Form Documents

Revise onboarding documents, employment agreements, promotion letters, and severance templates to ensure compliance with the new statute.

4. Evaluate Restriction Periods

Consider whether existing noncompete periods exceed the new two-year presumptively reasonable standard and whether revisions are appropriate.

5. Strengthen Alternative Protections

Review confidentiality, trade secret, customer non-solicitation, and employee non-solicitation agreements or consider new agreements for lower-wage employees to ensure adequate protection of business interests.

6. Train HR and Management

Human resources professionals and managers involved in hiring and onboarding should understand when noncompetes may be used and when they are prohibited, and consult legal counsel when in any doubt.

Bottom Line

Tennessee’s new noncompete law is no longer on the horizon — it is here. Any noncompete agreement entered into, renewed, or amended on or after July 1, 2026, must comply with the statute’s new requirements.

Employers should take this opportunity to review existing restrictive covenant programs, update templates, and ensure that their agreements remain enforceable (or are as enforceable as they can be) under Tennessee law. Waiting until a dispute arises with a departing employee is often too late. A proactive review now can help avoid costly litigation and protect valuable business interests in the future.