Tennessee Bans Non-Competes for Workers Earning Under $70K

Tennessee bars non-compete agreements for employees making less than $70,000 annually starting July 1, 2026.

Tennessee Governor Bill Lee signed House Bill 1034 into law on May 7, 2026, instituting significant limits on non-compete agreements affecting lower-wage workers. The law, effective July 1, 2026, applies to any non-compete entered into, renewed, or amended on or after that date, thereby requiring employers to revisit existing contracts and hiring practices.

Under the new statute, employers are prohibited from requiring, requesting, or enforcing a non-compete agreement against employees and independent contractors whose annualized compensation is less than $70,000. This reflects a growing trend nationally to limit restrictive covenants among lower-wage employees, addressing concerns over their impact on labor mobility and economic fairness.

The legislation also introduces a rebuttable presumption that non-compete clauses restricting competition for two years or less are reasonable, streamlining judicial assessment of enforceability. Additionally, courts have explicit authority to modify agreements to ensure compliance with the law's mandates rather than invalidating them wholesale.

Legal and human resources teams in Tennessee should prepare to adjust contract templates and policies accordingly. This law notably reshapes the balance of power in employment agreements by protecting a larger segment of the workforce from restrictive covenants that may limit job opportunities and wage growth.

For more detailed analysis and practical guidance, refer to comprehensive insights by BakerHostetler and Littler.