Noncompete Agreements in Tennessee: What Is Enforceable?

Ever signed an employment contract, skimmed past the noncompete clause, and wondered if it would actually hold up if you ever left the job? You are not alone. Noncompete agreements show up constantly in Tennessee employment contracts, business sales, and partnership arrangements, yet most people only think about them after a relationship has already gone sideways. With Tennessee lawmakers recently rewriting the rules, now is a good time to understand the landscape.

The New Rules of the Road

For years, Tennessee handled noncompetes the old-fashioned way: judges decided case by case whether a restriction was “reasonable,” with little statutory guidance outside healthcare. That changed when Governor Bill Lee signed House Bill 1034 into law, effective July 1, 2026.

The new statute does two notable things. First, it bars noncompetes against employees whose annualized compensation falls below $70,000, calculated to include wages, commissions, and nondiscretionary bonuses. Second, it creates “rebuttable presumptions” about how long a restriction can last, generally two years or less for employees and independent contractors, and up to five years in connection with the sale of a business.

Why does that matter to you? Because a noncompete that might have survived scrutiny last year could be void this year, and one that seemed shaky before might now benefit from a presumption of reasonableness.

What Tends to Make a Noncompete Stick

Even with the new statute, Tennessee courts still look at whether a restriction protects a legitimate business interest without being broader than necessary. Historically, that analysis considers a few recurring factors:

• Whether the time period and geographic scope are tailored to the employer’s actual market
• Whether the employee had access to trade secrets, confidential information, or specialized training
• Whether the restriction would create undue hardship on the employee’s ability to earn a living
• Whether the employee received something of value, such as a job offer or promotion, in exchange for signing

Courts can also “blue pencil,” or modify, an overly broad agreement to make it enforceable rather than tossing it out entirely. That flexibility cuts both ways. It can save a poorly drafted clause, but it also means the outcome is rarely black and white.

Healthcare and Other Special Situations

Noncompetes involving physicians and certain healthcare providers play by their own rulebook. Tennessee courts previously held that physician noncompetes were against public policy unless specifically authorized by statute, which led the Legislature to create a separate framework under Tenn. Code Ann. § 63-1-148, generally limiting healthcare noncompetes to two years and a defined geographic radius. Business sale agreements and franchise relationships also get their own treatment under the new statute, with longer presumptive timeframes than standard employment noncompetes.

The bottom line? Whether a noncompete is enforceable in Tennessee now depends on compensation thresholds, the type of relationship involved, and how carefully the agreement was drafted, factors that shifted meaningfully with the 2026 changes.

Questions About a Noncompete? Reach Out to Us Today

A noncompete clause can shape your career options or your business’s competitive edge for years, so it deserves more than a quick read before signing or enforcing one. If you are weighing a new job offer, drafting employment agreements, or wondering whether an existing restriction still holds up under the new law, our Knoxville business law attorneys at Reynolds, Atkins, Brezina & Stewart, PLLC are ready to look at the details with you. Contact Reynolds, Atkins, Brezina & Stewart, PLLC today to schedule a consultation and get clarity on where you stand.

Source:

billtrack50.com/billdetail/1819689