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Tennessee is poised to enact significant new limitations on non-compete agreements. The Tennessee General Assembly passed House Bill 1034 (“HB 1034”), introducing two key changes to the law governing restrictive covenants: (i) it establishes statutory rebuttable presumptions for the reasonableness of time restrictions, and (ii) it prohibits non-compete agreements with employees earning less than $70,000 in annualized compensation. Governor Bill Lee signed HB 1034 on May 7, 2026, and the legislation is slated to take effect July 1, 2026. HB 1034 represents a meaningful shift in Tennessee’s approach to non-competes.
Rebuttable Presumptions on Time Restriction
HB 1034 establishes rebuttable presumptions for the reasonableness of time restrictions. For former employees and independent contractors, a restraint of two years or less is presumed reasonable. For distributors, dealers, franchisees, and similar business relationships, a restraint of three years or less is presumed reasonable. For covenants tied to the sale of a business or equity interest, the presumptively reasonable period is the longer of five years or the period during which payments are made to the seller.
Compensation Threshold for Non-Competes
HB 1034 prohibits non-compete agreements for employees earning less than $70,000 in annualized compensation, inclusive of wages, salary, commission, and non-discretionary bonus. Compensation for hourly employees is calculated by multiplying the hourly rate by 40 hours and then by 52 weeks.
Non-Solicits and Confidentiality/Non-Disclosure Provisions
HB 1034 expressly preserves employers’ ability to enforce non-solicits and confidentiality and nondisclosure agreements without adhering to the same non-compete mandates.
Practical Takeaways for Employers
Employers should review their existing restrictive covenant agreement templates and confirm that the temporal scope satisfies the requirements of the law. Employers should also ensure not to require Tennessee-based employees earning less than $70,000 in annualized compensation to sign non-competes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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