New Tennessee Law Limits Noncompete Agreements for Lower-Wage Employees
Andy Scheu • May 14, 2026
Tennessee employers should prepare for major noncompete agreement changes beginning in 2026
Tennessee employers should be aware of an important legal update that could impact employment agreements and hiring practices beginning next year.
Governor Bill Lee has signed new legislation that restricts the use of noncompete agreements for certain employees, creating new compliance requirements for businesses across the state.
What’s Changing?
Effective July 1, 2026, Tennessee employers will no longer be permitted to require, request, or enforce noncompete agreements for employees earning less than $70,000 per year.
For hourly employees, compensation is annualized using a standard calculation of:
- 40 hours per week
- 52 weeks per year
That means an hourly employee earning below the equivalent annual threshold would generally be protected under this law.
Any noncompete agreement that violates this new requirement will be considered void and unenforceable.
What About Existing Agreements?
The law is not retroactive, which means existing noncompete agreements are not automatically invalidated.
However, employers should be cautious. The law will apply to any agreement that is:
- Newly entered into
- Amended
- Renewed
…on or after July 1, 2026.
Even making changes to an existing agreement after that date could bring it under the new law.
Additional Change: Restrictive Covenant Time Limits
The legislation also addresses the enforceability of restrictive covenants more broadly.
Under the new law, Tennessee courts will presume a restrictive covenant is reasonable if it lasts two years or less when enforcement is sought against a former employee or independent contractor.
While this doesn’t automatically guarantee enforceability, it does provide clearer guidance around what courts may view as a reasonable timeframe.
What Tennessee Employers Should Do Now
If your company uses noncompete agreements as part of hiring or retention practices, now is a good time to review your employment documents and policies before the law takes effect.
Key action items:
✓ Review current noncompete agreements
✓ Identify employees earning below the new compensation threshold
✓ Evaluate renewal or amendment plans for existing agreements
✓ Consult legal or HR advisors before updating employment contracts
Employment law changes can create compliance risks if policies are not updated correctly.
If you have questions about how this new Tennessee law may affect your business, the HR professionals at SESCO Management Consultants can help. Contact them at 423-764-4127 or sesco@sescomgt.com for guidance.
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Learn how new paid leave laws, AI employment regulations, and multi-state HR compliance trends are impacting employers in 2026 — and what businesses should do now to stay prepared.
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Clayton County (2020) – Supreme Court Decision https://www.supremecourt.gov/opinions/19pdf/17-1618_hfci.pdf • U.S. Department of Labor – Wage and Hour Division Opinion Letters https://www.dol.gov/agencies/whd/opinion-letters • Family and Medical Leave Act (FMLA) Overview https://www.dol.gov/agencies/whd/fmla
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