Tennessee’s new restrictive covenant legislation

Tennessee is on the verge of enacting sweeping changes to the enforceability of restrictive covenants. A bill that cleared both chambers of the General Assembly in April now awaits Governor Bill Lee’s signature, and enactment is widely expected. If signed, the law will take effect on July 1, 2026, and will apply to any restrictive covenant agreement entered into, renewed, or amended on or after that date. The new framework does not eliminate non-competes entirely, but it does impose meaningful constraints—including an income floor and statutory presumptions regarding permissible duration—that will require employers to reassess their current practices.

Background

As originally introduced, HB 1034 proposed a blanket prohibition on noncompete agreements in Tennessee, barring enforcement of any restriction on an employee’s or independent contractor’s ability to practice their profession following the end of an engagement. That version passed the House by a wide margin in mid-April. The Senate, however, replaced the outright ban with a more nuanced regulatory framework, which passed 28-4 on April 20. The House concurred in the Senate's substitute, and the bill received the Speaker’s signature on April 30.

What will change