Tennessee Voids Noncompetes Below $70,000: What Changes July 1

Tennessee House Bill 1034, signed by Governor Bill Lee on May 15, 2026, makes noncompete agreements void and unenforceable against employees earning below $70,000 per year. The law also codifies presumptive duration limits for workers above that line. Every affected agreement is governed by these rules starting July 1, 2026.

Information last verified on October 10, 2026. This is a developing story; we update it as the record changes.

Status: Signed by Gov. Bill Lee on May 15, 2026 (Public Chapter 934); takes effect July 1, 2026. As of June 26, 2026 the new rules are not yet in force. Update, October 2026: the law took effect as scheduled on July 1, 2026.

Jurisdiction scope: This article addresses Tennessee House Bill 1034, codified at Tenn. Code Ann. sections 50-1-210 and 50-1-211, and its effect on Tennessee employment law. It does not address noncompete law in other states. For Tennessee employment law generally, see Tennessee at-will employment laws.

What Happened

On May 15, 2026, Governor Bill Lee signed House Bill 1034, passed during the 114th General Assembly, into law as Public Chapter 934. The companion bill was Senate Bill 995. The legislation makes two major changes to Tennessee restrictive-covenant law, which until now had developed almost entirely through common law rather than statute.

First, the bill draws a hard compensation floor. Any noncompete agreement with an employee whose annualized total compensation, wages, salary, commissions, nondiscretionary bonuses, and other forms of remuneration, is below $70,000 is void and unenforceable as a matter of public policy. The annualization formula for hourly workers is explicit: multiply the employee's hourly rate by 40, then multiply that figure by 52. A worker paid $33 per hour would annualize at $68,640 and fall below the line.

Second, for agreements with workers who do clear the $70,000 mark, the bill creates a rebuttable-presumption framework for duration. Courts are directed to presume that a restriction is reasonable in time if it falls within the following windows:

• Employees and independent contractors: two years or less from the date the working relationship ends.
• Distributors, dealers, franchisees, lessees, and trademark licensees: three years or less.
• Sellers of a business or a significant equity interest: five years or less, or the duration of any earn-out payments or seller-financing obligations, whichever period is longer.

These are rebuttable presumptions, not safe harbors. A party challenging a noncompete within those windows can still argue that the restriction is unreasonable on other grounds, such as geographic scope or the nature of the restricted activity.

The duration section states that it does not prohibit an employer from enforcing confidentiality or nondisclosure agreements, client or customer non-solicitation agreements, or employee non-solicitation agreements. Those remain governed by existing Tennessee common law.

The effective date is July 1, 2026. The act says it applies to agreements entered into, renewed, or amended on or after that date, and to proceedings occurring on or after that date. Pre-existing agreements are not automatically voided; whether the "proceedings" language reaches a lawsuit filed after July 1, 2026 over an older, unchanged agreement has not been decided.

The bill is codified at Tenn. Code Ann. sections 50-1-210 and 50-1-211. The Tennessee General Assembly bill page at wapp.capitol.tn.gov records the act as Public Chapter 934, and the Tennessee Secretary of State publishes the chapter text.

What the Law Actually Says

Tennessee had no statute governing private-sector employee noncompetes outside the healthcare industry before HB 1034. Courts evaluated restrictive covenants under a reasonableness standard developed over decades of common law. A court weighed whether the restriction was reasonable in time, territory, and scope of activity, whether it was supported by adequate consideration, and whether enforcing it would harm the public. Tennessee courts apply a "rule of reasonableness," which the Tennessee Supreme Court adopted in Central Adjustment Bureau, Inc. v. Ingram (1984) in place of the narrower "blue-pencil" rule, meaning they could narrow an overbroad covenant to make it enforceable rather than striking it down entirely. See Tennessee at-will employment laws for the broader employment framework.

What HB 1034 adds on top of that common law:

A statutory floor. The compensation threshold functions as a categorical rule. It is not a factor a court balances; a noncompete with a sub-$70,000 employee is void, period. Employers cannot cure it with narrower geographic scope or shorter duration. The definition counts total compensation, "including wages, salary, commissions, nondiscretionary bonuses, and other forms of remuneration." The act does not say whether a discretionary bonus counts as "other forms of remuneration," so an employer relying on one to clear the line takes a risk.

Presumptive duration windows. The law gives courts a structured starting point for duration challenges. Before HB 1034, Tennessee courts treated "reasonableness in time" as an open-ended inquiry. Now, a covenant that falls within the applicable window is presumed reasonable in that dimension, shifting the burden to the party attacking it.

What the law leaves in place. The duration presumptions in 50-1-210 apply to restrictive covenants enforced after an employment or business relationship ends, and the $70,000 rule in 50-1-211 applies to "noncompete agreements," a term the act does not define. Confidentiality obligations, non-solicitation of clients, and non-solicitation of other employees are carved out of the duration section, 50-1-210(c), and remain enforceable under existing Tennessee law. The $70,000 section does not repeat that carve-out or define "noncompete agreement," so whether it reaches a non-solicitation clause with a lower-paid worker is a question no court has answered yet.

The independent-contractor distinction. The $70,000 compensation floor applies only to employees. Independent contractors are not protected by the compensation threshold. However, independent contractors do benefit from the two-year duration presumption alongside employees.

Analysis: Why This Matters

The following is analysis from the Recording Law Editorial Team.

Tennessee is not the first state to set a compensation floor for noncompetes. Minnesota voided nearly all of them in 2023, apart from narrow exceptions such as the sale of a business, while states including California have long voided them as a category. What Tennessee has done is narrower than a ban but more consequential than a pure reasonableness test: it draws a line that an estimated significant share of the Tennessee workforce sits below, given that the $70,000 figure is above median annual earnings for many service, retail, trade, and entry-level professional roles.

The national context matters. The Federal Trade Commission's sweeping 2024 rule that would have banned virtually all noncompetes nationwide was vacated by the U.S. District Court for the Northern District of Texas in Ryan LLC v. FTC (N.D. Tex. 2024). That decision left noncompete reform to state legislatures. Tennessee's HB 1034 is part of a wave of state-level action that has filled the vacuum. The law firm alerts from Morgan Lewis, Littler, and Ogletree Deakins all place Tennessee within this trend.

For employers, the practical effect depends heavily on workforce composition. Companies with large frontline or skilled-trade workforces are the most immediately affected, because many workers in those categories will fall below $70,000. For those workers, existing noncompetes are not automatically voided, so the employer's current agreements generally remain in effect, though the act's "proceedings" language has not yet been tested. But when a covered worker's contract comes up for renewal or amendment on or after July 1, 2026, any noncompete in that document will be void. Employers who want continued protection for those workers are likely to turn to confidentiality and non-solicitation clauses, which the act's duration section expressly preserves, though whether the $70,000 section reaches a non-solicitation clause has not been decided.

For workers, the benefit is contingent on the prospective scope. Someone already bound by a noncompete signed before July 1, 2026, does not get automatic relief. The statute does not void those agreements. The clearest relief arrives at the next renewal or amendment.

The presumptive duration windows serve a different constituency: employers above the $70,000 line who want a clearer standard, and courts that now have a statutory anchor for what "reasonable time" means. Those presumptions were not part of the law before; judges had to work from caselaw alone. The framework does not eliminate litigation over noncompetes with high earners, but it may reduce disputes confined to duration where the restriction falls within the window.

How This Affects You

These descriptions are general. They do not address any individual situation or constitute legal advice.

If you are an employee in Tennessee earning below $70,000 annually, a noncompete your employer asks you to sign on or after July 1, 2026, is void and unenforceable under HB 1034. That protection does not automatically reach a noncompete you already signed before that date unless the agreement is renewed or amended, though no court has yet decided how the act's "proceedings" language applies to older agreements.

If you are an employer in Tennessee, any noncompete clause you include in agreements signed, renewed, or amended on or after July 1, 2026, with employees earning below $70,000 will have no legal effect. The new duration presumptions for agreements with higher-compensated workers may change how courts evaluate challenges to the time limits in your existing templates.

Confidentiality agreements remain available under Tennessee common law, and the act's duration section expressly preserves non-solicitation covenants, though whether the $70,000 section reaches a non-solicitation clause has not been decided. For the specifics of how at-will employment laws interact with restrictive covenants in your state, see our state-by-state guides.

What Happens Next

July 1, 2026, is the operative date. Noncompete agreements entered into on that date or later are subject to HB 1034's full framework. Agreements signed before that date are not automatically affected.

For employers with pending hires, promotions, or renewals timed around that date, the clock matters. A contract executed on June 30, 2026, is not automatically subject to the new $70,000 rule; a contract executed on July 1, 2026, is.

Courts will eventually be asked to interpret edge cases: what constitutes an amendment that triggers the statute's application to an existing agreement; how courts treat mixed-compensation arrangements that straddle the $70,000 line; and how the rebuttable presumptions interact with the courts' power to modify an overbroad covenant, which 50-1-210(d) now confirms, when a noncompete is otherwise unreasonable. Those questions will be answered as litigation develops after the effective date.

The Tennessee legislature could revisit the statute, for example, to adjust the threshold over time or to address emerging interpretive questions, but nothing in the current record indicates any planned amendment. Illinois, where courts and the legislature have both shaped noncompete law through a similar income-threshold model, offers one comparison point for how threshold-based frameworks operate in practice. See Illinois at-will employment laws for that context.

This is general legal information, not legal advice. It covers Tennessee employment law and reflects sources verified on October 10, 2026. Laws change and this story is developing; consult a lawyer licensed in your jurisdiction about your specific situation.

Sources

• Tennessee HB 1034 (114th General Assembly), Bill Information, Tennessee General Assembly (primary; bill status page; full text in enrolled/chaptered form)
• Tennessee Enacts Significant Changes to Noncompete Law Through HB 1034, Morgan Lewis (June 2026)
• Thumb on the Scale: Tennessee Enacts New Reasonableness Presumptions for Noncompete Agreements While Outlawing Covenants for Lower-Wage Earners, Littler (2026)
• Tennessee Bans Noncompetes for Workers Making Less Than $70,000 Annually, Ogletree Deakins (2026)
• Tennessee Enacts New Restrictions on Noncompete Agreements, Epstein Becker Green (2026)
• Tennessee HB1034, 2025-2026, 114th General Assembly, LegiScan

Related articles

• Tennessee at-will employment laws
• At-will employment laws hub
• Illinois at-will employment laws

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Last updated: 2026-06-26. This is a developing story; details verified as of 2026-06-26.

Frequently Asked Questions

What does Tennessee HB 1034 do?

It makes noncompete agreements void and unenforceable for employees earning below $70,000 per year in total annual compensation, and it creates rebuttable presumptions that noncompetes are reasonable in duration if they fall within specified time windows (two years for employees and independent contractors, three years for distributors and franchisees, five years for sellers of a business). It applies to agreements entered into, renewed, or amended on or after July 1, 2026, and to proceedings occurring on or after that date.

Who is protected by the $70,000 compensation floor?

Only employees. The $70,000 section is written around an 'employee' and does not mention independent contractors. An independent contractor can still be subject to a noncompete regardless of their earnings, though they do benefit from the two-year duration presumption.

How is annual compensation calculated for hourly workers?

Under HB 1034, an hourly employee's annualized compensation equals the hourly rate multiplied by 40, then multiplied by 52. A worker earning $32 per hour would annualize at $66,560, placing them below the $70,000 line.

Does HB 1034 void existing noncompetes for workers below $70,000?

Not automatically. The act applies to agreements entered into, renewed, or amended on or after July 1, 2026, and to proceedings occurring on or after that date. A noncompete signed before that date and never renewed or amended is generally governed by Tennessee common law, even if the worker earns below $70,000, though no court has yet decided whether the proceedings language changes that for lawsuits filed after July 1, 2026.

Can employers still use confidentiality or non-solicitation agreements for workers below $70,000?

Generally yes. The act's duration section states that it does not prohibit enforcing confidentiality agreements, client non-solicitation agreements, or employee non-solicitation agreements, and those covenants remain governed by existing Tennessee law. The $70,000 section covers noncompete agreements and does not define the term, so whether it reaches a non-solicitation clause with a lower-paid worker has not been decided.

What are the new presumptive duration limits for noncompetes above the $70,000 threshold?

Courts presume a noncompete is reasonable in duration if it is two years or less for employees and independent contractors, three years or less for distributors, dealers, franchisees, lessees, and trademark licensees, and five years or less for sellers of a business or equity interest (or the duration of any earn-out payments, whichever is longer). These are rebuttable presumptions, not absolute safe harbors.

Where is Tennessee HB 1034 codified?

The legislation adds sections 50-1-210 and 50-1-211 to the Tennessee Code Annotated. The enrolled text is available on the Tennessee General Assembly's bill information portal at wapp.capitol.tn.gov.

How does this relate to the failed FTC noncompete ban?

The U.S. District Court for the Northern District of Texas vacated the FTC's 2024 nationwide noncompete ban in Ryan LLC v. FTC (N.D. Tex. 2024), leaving noncompete law to the states. Tennessee's HB 1034 is part of a broader pattern of state legislatures acting where federal regulation did not. It is a state-law measure and operates independently of any federal rulemaking.