If you run a business in Tennessee, you have probably used a non-compete agreement, or thought about it, to keep employees from taking your trade secrets to a competitor. For a long time, Tennessee judges decided these cases one at a time, without much guidance but that changed this year. A new state law, effective July 1, 2026, gives businesses and workers clearer rules about what counts as fair.
What the new law actually says
The law, known as House Bill 1034, does two main things. First, it bans non-compete agreements for any employee who earns less than $70,000 a year. That number includes salary, wages, commissions, and regular bonuses. If you try to enforce a non-compete against a lower-paid worker, it will not hold up in court.
Second, the law sets time limits that judges will presume are reasonable. For most employees and contractors, two years or less is considered fair. Longer agreements are not automatically thrown out, but the burden shifts to the employer to prove the extra time is justified. Business sales and franchise agreements get longer windows, since those situations involve different risks. Healthcare workers still follow their own separate rules, unchanged by this law.
What this means if you already have agreements in place
The good news is that the law only applies going forward. Contracts signed before July 1, 2026, are not affected unless you renew or amend them. Still, this is a good moment to look at your current agreements and templates. If you rely mostly on non-competes, consider whether solid confidentiality or non-solicitation clauses might protect your business just as well, without the legal risk.
Talking with an attorney can help
Non-compete law in Tennessee is more structured now, but it is still not simple. An attorney familiar with Tennessee employment law can look at your specific agreements, your industry, and your workforce, then help you figure out what actually needs to change. A short conversation now could save a lot of confusion or a lost court case, later on.