Tennessee Enacts Non-Compete Law: $70K Income Threshold and Rebuttable Presumptions on Duration
Tennessee House Bill 1034 was signed into law on May 7, 2026, and took effect July 1, 2026. The law introduces two significant changes to employment-based non-compete agreements. First, the law bars non-competes for employees earning below $70,000 annually. Second, it establishes statutory presumptions of reasonableness for non-compete duration.
Non-Compete Agreements Prohibited for Employees Earning Below $70k Annually
Under Tenn. Code Ann. § 50-1-211, non-compete agreements are prohibited for employees who earn less than $70,000 in “annualized compensation.” The statute defines the term “annualized compensation” broadly to include wages, salary, commissions, nondiscretionary bonuses, and other forms of remuneration. For hourly employees, annualized compensation is calculated by multiplying the hourly rate by 40, then by 52.
In enacting Tenn. Code Ann. § 50-1-211, Tennessee joins a growing number of states — including Virginia, Illinois, Maine, and Washington — that prohibit non-compete agreements for workers below a specified income threshold.
Rebuttable Presumptions of Reasonableness
Tenn. Code Ann. § 50-1-210 also creates a statutory rebuttable presumption regarding
duration. A restriction that falls at or below the applicable presumption is presumed reasonable; a restriction that exceeds it is presumed unreasonable. The presumptive periods vary by relationship type:
| Relationship | Rebuttable Presumption of Reasonableness |
| Employees and Independent Contractors | 2 years |
| Distributors, Dealers, Franchisees, Lessees, and Certain Licensees | 3 years |
| Sale-of-Business | 5 years |
Tenn. Code Ann. § 50-1-210 explicitly grants courts the discretion to modify non-compete agreements to render them reasonable and enforceable, meaning that an agreement exceeding the presumption will not automatically fail as void and unenforceable.
Key Takeaways for Employers
Employers with Tennessee-based employees should review their restrictive covenant templates for compliance with the new income threshold and rebuttable statutory presumptions. Because House Bill 1034 is not retroactive, only agreements entered on or after July 1, 2026, are subject to the new requirements.
This article was prepared with the assistance of 2026 summer associate Ally Anderson
