Tennessee Reshapes Its Restrictive Covenant Landscape: New Limits on Noncompetes and Employer-Friendly Presumptions Take Effect

Effective July 1, 2026, Tennessee will significantly alter its legal rules governing employee noncompetition agreements. New legislation limits employers’ ability to impose noncompetes on certain employees based on compensation levels while creating a more favorable enforcement framework for agreements that remain permissible. The law also reinforces Tennessee courts’ ability to preserve reasonable post-employment restrictions by modifying overbroad provisions rather than discarding them entirely. As a result, employers should review existing restrictive covenant strategies and agreement templates to ensure compliance with the new framework, while also considering alternative methods for protecting confidential information, customer relationships, and workforce stability.

What Changed?

Beginning July 1, 2026, Tennessee employers generally may not enter into, renew, or extend noncompetition agreements with employees earning less than $70,000 annually (or the hourly equivalent). The statute represents a notable shift for Tennessee, which historically evaluated restrictive covenants primarily through common-law reasonableness standards. By imposing a compensation threshold, Tennessee joins a growing number of states limiting noncompetes for lower-wage and middle-income workers.

Importantly, the law does not invalidate all existing agreements. Instead, the new requirements generally apply prospectively to agreements entered into, renewed, or materially revised on or after July 1, 2026. Accordingly, employers revising restrictive covenant agreements after that date should carefully assess whether affected employees satisfy the statutory compensation threshold.

Tennessee Creates a Presumption of Reasonableness for Shorter Restrictions

Although the law narrows employers’ ability to impose noncompetes on certain employees, it also may strengthen enforceability for agreements that remain permissible by creating a rebuttable presumption favoring shorter restrictions.

Under the new law, noncompetition restrictions lasting two years or less are presumed reasonable. While Tennessee courts historically evaluated duration, geographic scope, and other restrictions on a case-by-case basis, the new presumption may provide employers greater predictability when defending carefully tailored post-employment restrictions.

The new framework does not make all two-year restrictions automatically enforceable, however. Courts will still evaluate whether the restriction protects a legitimate business interest and remains appropriately tailored to the employee’s role and access to protected information. That said, the reasonableness presumption may reduce litigation uncertainty for employers using narrower, carefully drafted agreements.  By contrast, agreements extending beyond two years will likely face greater scrutiny and may require employers to justify why a longer restriction is necessary under the circumstances.

Courts Retain Authority to Narrow Overbroad Restrictions

The new law also reinforces Tennessee courts’ longstanding preference for preserving reasonable post-employment protections rather than invalidating restrictive covenants outright. Where a provision sweeps too broadly, Tennessee courts retain authority to narrow or modify the restriction to render it enforceable. This approach may benefit employers by reducing the risk that an otherwise legitimate restrictive covenant fails entirely because one provision extends too far geographically or temporally.

Even so, employers should not assume courts will rewrite overly aggressive agreements. Overbroad restrictions still create litigation risk, increase enforcement costs, and may invite judicial skepticism. Thoughtful tailoring remains important.

What Protections Remain Available?

Although Tennessee now limits noncompetes for employees below the statutory earnings threshold, employers still retain several important tools to protect legitimate business interests.

For example, employers may continue using appropriately tailored:

• Confidentiality and trade secret protections;
• Customer and client non-solicitation restrictions;
• Employee non-solicitation provisions; and
• Invention assignment and proprietary information agreements.

For lower-paid employees who no longer qualify for noncompetes, employers may increasingly rely on these alternatives to protect confidential business information and workforce stability without restricting post-employment mobility.

What Employers Should Do Now

Tennessee employers should consider taking the following steps before July 1, 2026:

• Audit existing restrictive covenant agreements. Employers should identify which employees currently sign noncompetes and determine whether compensation levels satisfy the new statutory threshold.
• Review template agreements. Employers should revise Tennessee-specific agreements to account for the new compensation limitations and consider whether shorter durations better position agreements for enforcement.
• Tailor restrictions to role and risk. Employers should ensure restrictions remain tied to legitimate business interests, including access to confidential information, goodwill, and customer relationships.
• Evaluate alternative protections. For employees who no longer qualify for noncompetes, employers may wish to strengthen confidentiality, non-solicitation, and trade secret protections.

Key Takeaway

Tennessee’s new law reflects a broader national trend: states continue narrowing access to employee noncompetes while preserving targeted restrictions for employees with greater access to confidential information and customer goodwill. For Tennessee employers, the law narrows the circumstances in which noncompetes may be used while simultaneously strengthening the enforceability position for agreements that remain permissible.

Employers should use the time leading up to July 1, 2026, to review existing agreements and implement Tennessee-specific strategies that align with the new statutory framework. For assistance, please contact one of Honigman’s Employment and Labor Attorneys here.