You may have a signed noncompete sitting in an employee’s file.

That does not necessarily mean it will protect your business when you need it.

Tennessee’s new noncompete law took effect July 1, 2026, changing which employees may be subject to these agreements and how courts will evaluate their duration.

Selling your business? The employee noncompete restrictions discussed below are separate from the noncompete an owner may sign as part of selling a business. Sale-related noncompetes follow different rules.

The $70,000 threshold

Tennessee employers may no longer require, request, or enforce a noncompete against an employee whose annualized compensation is less than $70,000.

That calculation can include salary, wages, commissions, nondiscretionary bonuses, and other compensation. For hourly employees, the law uses the employee’s hourly rate based on a 40-hour workweek.

This could significantly affect businesses that rely on sales representatives, account managers, or other customer-facing employees who earn below the threshold but still have access to valuable relationships, pricing information, and confidential business data.

How long can a noncompete last?

The new law also gives courts guidelines for evaluating the length of restrictive covenants.

For employees and independent contractors, a restriction lasting two years or less is presumed reasonable in duration. A restriction lasting longer than two years is presumed unreasonable, although courts may consider the circumstances and modify an agreement when appropriate.

Different time periods apply to certain business relationships and agreements connected to the sale of a business.

What about existing agreements?

The law applies to agreements entered into, renewed, or amended on or after July 1, 2026. Its effective-date language also refers to legal proceedings occurring on or after that date.

In other words, business owners should not assume an older agreement is automatically unaffected. Review an existing agreement with counsel before renewing, changing, or attempting to enforce it.

Noncompetes are not your only protection

The new law does not prohibit businesses from using properly drafted:

• Confidentiality and nondisclosure agreements
• Customer or client non-solicitation agreements
• Employee non-solicitation agreements

These protections may now be even more important, particularly when an employee earns less than $70,000 and cannot be bound by a noncompete.

What should your business do now?

Start by reviewing every place a noncompete might appear, including employment agreements, offer letters, compensation plans, promotion documents, and standalone restrictive covenant agreements.

Then ask:

• Which employees are below the new compensation threshold?
• Do any restrictions last longer than two years?
• Are your confidential information and customer relationships protected in other ways?
• Are managers still using an outdated agreement during hiring or promotions?

These questions also matter if you plan to sell your company. A buyer may want to know whether the relationships, information, and employees that create value for the business are adequately protected. An outdated or unenforceable agreement can create unnecessary uncertainty during due diligence.

Do not wait until an important employee leaves for a competitor to discover that your documents no longer work as intended. Need help? Contact us today.

The information provided in this article is for informational purposes only and does not constitute legal advice. No attorney-client relationship is formed by virtue of this article. For specific legal advice related to your situation, please consult with a qualified attorney.