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

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

Tennessee House Bill 1034, signed by Governor Bill Lee on May 7, 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 June 26, 2026. This is a developing story; we update it as the record changes.

Status: Signed by Gov. Bill Lee on May 7, 2026; takes effect July 1, 2026. As of June 26, 2026 the new rules are not yet in force.

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 7, 2026, Governor Bill Lee signed House Bill 1034, passed during the 114th General Assembly, into law. 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 law does not touch confidentiality agreements, non-solicitation covenants covering clients or prospective clients, or employee non-solicitation agreements. Those remain governed by existing Tennessee common law.

The effective date is July 1, 2026. The statute applies only to agreements entered into, renewed, or amended on or after that date. Pre-existing agreements are not retroactively voided.

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 carries the enrolled text and the public act designation; the chapter number was not independently verified from a successfully fetched source and is therefore not cited here.

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 generally applied the "blue-pencil" doctrine, 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 threshold applies to all forms of cash remuneration, so an employer cannot structure around it by reducing base salary while relying on discretionary bonuses that push the effective total above $70,000, only nondiscretionary bonuses count toward the calculation.

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 $70,000 ceiling and the duration presumptions both apply only to "noncompete" restrictions, clauses barring a former employee from working for a competitor or in a competing business. Confidentiality obligations, non-solicitation of clients, and non-solicitation of other employees are separately carved out and remain enforceable under existing Tennessee law, including against workers below the $70,000 line.

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 banned them entirely in 2023 for all workers, 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, each published after the May 7 signing, 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 will not suddenly vanish, the prospective-only rule means the employer's current agreements remain in effect. But when a covered worker's contract comes up for renewal or amendment after July 1, any noncompete in that document will be void. Employers who want continued protection for those workers will need to shift to non-solicitation and confidentiality clauses, which HB 1034 explicitly preserves.

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 relief arrives at the next renewal or renegotiation.

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 apply to a noncompete you already signed before that date unless and until the agreement is renewed or amended.

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 and non-solicitation covenants are not affected by the $70,000 threshold and remain available under Tennessee common law. 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, falls under the old common-law framework. A contract executed on July 1, 2026, falls under the new statute.

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 Tennessee's blue-pencil tradition 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 June 26, 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

---

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 only to agreements entered, renewed, or amended on or after July 1, 2026.

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

Only employees. The statute expressly excludes independent contractors from the compensation threshold. 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?

No. The law is strictly prospective. It applies only to agreements entered into, renewed, or amended on or after July 1, 2026. A noncompete signed before that date remains governed by Tennessee common law, even if the worker earns below $70,000.

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

Yes. HB 1034 expressly preserves confidentiality agreements, client non-solicitation agreements, and employee non-solicitation agreements. Those covenants are not subject to the $70,000 threshold and continue to be enforceable under existing Tennessee law.

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.