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Noncompete enforcement has been a growing trend in state legislatures since the Federal Trade Commission attempted to ban the covenant in 2024. For example, Washington banned noncompetes and Virginia significantly limited enforcement of the covenant in 2026. Wyoming basically banned the covenant in 2025 outside a few exceptions (i.e., protection of trade secrets, sale of a business, etc.). Other states, such as Ohio and New York, proposed legislation that would have substantially limited the covenant's enforceability.
Employers using noncompetes continue to see an upward trend in state legislatures reshaping noncompete enforcement because, effective July 1, 2026, Tennessee joins the fold. Below discusses how Tennessee, like a growing number of states, has turned the tide on the covenant:
Reasonable Time Restraints
The law establishes rebuttable presumptions regarding the reasonableness of noncompete time restraints. Those reasonable presumptions are:
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A restriction of two years or less for former employees and independent contractors.
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A restriction of three years or less for distributors, dealers, franchisees, lessees, or trademark licensees.
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A restriction of five years or less — or a period equal to the time during which payments are made to the owner or seller — for an owner or seller of a business or equity interest.
Any time restraint exceeding these thresholds is presumed unreasonable. Importantly, courts retain the authority to modify an unreasonable restrictive covenant to render it enforceable.
Establishing an Employee Income Threshhold
Perhaps the most employee-friendly provision is that employers cannot enforce a covenant not to compete if an employee makes less than $70,000 a year. The compensation requirement would include wages, salary, commissions, nondiscretionary bonuses, and other remuneration. Any noncompete executed in violation of this provision is void and unenforceable as a matter of public policy.
What Is Not Affected
The law does not prohibit enforcement of confidentiality or nondisclosure agreements, client or customer nonsolicitation agreements, or employee nonsolicitation agreements.
Key Takeaway
Tennessee employers should review existing noncompete agreements and ensure that any new agreements entered into, renewed, or amended on or after July 1, 2026, comply with these new requirements.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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