Tennessee Restricts Use of Noncompete Agreements for Lower-Wage Employees 

Tennessee employers should be aware of a new state law that limits the use of noncompete agreements for certain workers based on compensation level. 

Under the new legislation, noncompete agreements are now prohibited for employees who earn less than $70,000 per year. This change reflects a broader national trend toward restricting post-employment restrictions for lower-wage workers and ensuring greater mobility in the labor market. 

• The law will apply to agreements entered into, renewed, or amended on or after July 1, 2026.  

• Noncompetes executed after July 1, 2026 for employees who do not meet the minimum annualized compensation will be void and unenforceable. 

Noncompete agreements are generally used by employers to restrict former employees from working for competing organizations or starting competing businesses for a defined period of time after employment ends.  

While these agreements remain permissible for higher-compensated employees under certain conditions, Tennessee’s new law narrows their enforceability by establishing a clear salary threshold. 

For employers, this means that any existing noncompete agreements or onboarding templates should be reviewed to ensure compliance with the new requirement. Agreements that include noncompete provisions for employees earning below the $70,000 threshold may be unenforceable and could expose employers to legal challenges or compliance risk. 

Employers should also consider whether alternative restrictive covenants—such as confidentiality agreements, nondisclosure provisions, and non-solicitation clauses—may be more appropriate and enforceable tools to protect business interests without violating state law. These alternatives are often less restrictive while still safeguarding proprietary information, customer relationships, and trade secrets. 

Comparison of Common Employment Restrictive Covenants 

In addition, organizations should review job classifications, compensation structures, and standard employment agreements to confirm alignment with the new statutory requirements. Employers with multi-state operations should pay particular attention to differing state rules regarding noncompete enforceability, as thresholds and restrictions vary significantly across jurisdictions. 

Clients with employees in Tennessee are encouraged to review current noncompete practices and consult with their HR team to ensure compliance with the new law and to identify alternative protections where appropriate.