Are Non-Competes Enforceable in Tennessee? The Rules After the 2026 Law

Non-competes are one of the most common sources of friction when an employee leaves or a business changes hands. In Tennessee, the answer to whether one is enforceable now has two layers: a statute that took effect on July 1, 2026, and the case law that courts have applied for decades.

What the 2026 statute changed

Public Chapter 934 of 2026 added two sections to the Tennessee Code. It applies to proceedings occurring, and agreements entered into, renewed, or amended, on or after July 1, 2026.

The pay floor (§ 50-1-211). An employer may not require, request, or enforce a non-compete against an employee whose annualized compensation is less than $70,000. Annualized compensation includes wages, salary, commissions, nondiscretionary bonuses, and other remuneration; for an hourly employee, it is the hourly rate times 40 times 52. A non-compete executed in violation is void and unenforceable as a matter of public policy.

Time presumptions (§ 50-1-210). When a court decides whether a restrictive covenant is reasonable in time, it applies rebuttable presumptions that these durations are reasonable:

• two years or less from the end of the relationship, for a former employee or independent contractor, if the restraint is not associated with the sale or ownership of all or a material part of a business or an equity interest in one;
• three years or less, for a distributor, dealer, franchisee, lessee of real or personal property, or licensee of a trademark, trade dress, or service mark;
• the longer of five years or the period during which payments are made to the owner or seller, for the owner or seller of all or a material part of a business or an equity interest in one.

A longer restraint is presumed unreasonable, and the court may modify a covenant to make it reasonable and enforceable. Section 50-1-210(c) adds that this section does not prohibit an employer from enforcing a confidentiality or nondisclosure agreement, a client or customer non-solicitation agreement, or an employee non-solicitation agreement.

The presumptions address time only. Whether a covenant is reasonable in scope and geography, and whether it protects a real business interest, still comes from the case law.

The case-law test still applies

Tennessee courts have long said non-competes are not favored and are enforced only when reasonable. In Hasty v. Rent-A-Driver, Inc. (Tenn. 1984), the Tennessee Supreme Court held that an employer cannot use a contract to restrain ordinary competition; it needs special facts that would give the departing employee an unfair advantage. Courts weigh the consideration supporting the covenant, the threatened danger to the employer, the economic hardship to the employee, and the public interest, and the time and territory can be no greater than necessary to protect the employer's business interest (Allright Auto Parks, Inc. v. Berry, Tenn. 1966).

In Vantage Technology, LLC v. Cross (Tenn. Ct. App. 1999), the Court of Appeals framed the protectable interest around three considerations: specialized training, trade secrets or confidential information, and repeated contact with customers that leads them to associate the business with the employee. General skill and knowledge, even if expensive to develop, usually do not qualify.

Signing mid-employment

A non-compete signed after an employee has already started work raises the question of consideration. In Central Adjustment Bureau, Inc. v. Ingram (Tenn. 1984), the Tennessee Supreme Court held that a covenant signed during at-will employment is supported by consideration when the employment actually continues for an appreciable time afterward. An employer that fires the employee arbitrarily or in bad faith soon after may find a court unwilling to enforce the covenant.

Courts can trim an overbroad covenant

Tennessee does not follow a strict rule that voids an overbroad covenant entirely. Central Adjustment Bureau adopted a rule of reasonableness: absent bad faith by the employer, a court enforces the covenant to the extent reasonably necessary to protect the employer's interest. The 2026 statute likewise lets a court modify a covenant to make it reasonable. A covenant written to be deliberately unreasonable and oppressive, though, can be refused altogether.

Selling a business

Courts have long treated a non-compete given by the seller of a business more favorably than one in an employment agreement, because the buyer is paying for goodwill the seller could otherwise take back. In Greene County Tire & Supply, Inc. v. Spurlin (Tenn. 1960), the Tennessee Supreme Court upheld a five-year, 100-mile covenant tied to a business sale. The 2026 statute now presumes reasonable in time a restraint lasting the longer of five years or the period during which payments are made to the owner or seller, for the owner or seller of all or a material part of a business or an equity interest in one.

Healthcare providers

Healthcare also has its own statute, but the 2026 Act has no healthcare exception, and its $70,000 pay floor (§ 50-1-211) applies even where another law says otherwise. After Murfreesboro Medical Clinic, P.A. v. Udom (Tenn. 2005) held physician non-competes unenforceable unless a statute provided otherwise, the legislature enacted Tenn. Code Ann. § 63-1-148. It treats covenants for covered providers, including physicians, osteopathic physicians, dentists, chiropractors, podiatrists, optometrists, and psychologists, as reasonable if they are written and signed, last two years or less, and either meet the statute's geographic limit or, with no geographic limit, bar practice only at facilities where the employer provided services during the relationship, with separate rules for the sale of a practice. It does not apply to emergency medicine physicians. I am not aware of a Tennessee appellate decision yet addressing how § 63-1-148 interacts with the 2026 statute.

Non-solicits, confidentiality, and trade secrets

Non-solicitation and confidentiality agreements are often the provisions that matter most when someone leaves, and § 50-1-210(c) states that the time-presumption section does not prohibit enforcing them. The $70,000 rule in § 50-1-211 applies to "noncompete agreements," a term the statute does not define. Separately, the Tennessee Uniform Trade Secrets Act (Tenn. Code Ann. § 47-25-1701 et seq.) allows an injunction against actual or threatened misappropriation of trade secrets, and a contractual duty to keep a trade secret confidential or limit its use is not void solely because it has no time or geographic limit (§ 47-25-1708).

The FTC rule never took effect

In 2024 the Federal Trade Commission adopted a rule that would have banned most non-competes nationwide. A federal court set it aside before it took effect (Ryan, LLC v. FTC, N.D. Tex. 2024). The FTC dropped its appeals in 2025, and the rule was removed from the Code of Federal Regulations effective February 12, 2026. With no federal rule in place, whether a non-compete is enforceable is a question of state law, which in Tennessee now means the 2026 statute and the case law.

Enforcing or defending one

Enforcement usually begins with a demand letter and, if needed, a request for a temporary injunction. Under Tennessee Rule of Civil Procedure 65.04, the party seeking one must clearly show that its rights are being or will be violated and that it will suffer immediate and irreparable injury before final judgment, or that the other side's acts or omissions will tend to make a final judgment ineffectual. A choice-of-law clause selecting another state's law is generally honored in Tennessee if it was made in good faith, the chosen state has a material connection to the transaction, the choice is reasonable and not a sham, and the chosen law is not contrary to a fundamental policy of a state with a materially greater interest.

Whether a particular covenant holds up depends on its date, the worker's pay, the interest it protects, and how it is written. If you are drafting, enforcing, or facing a non-compete in Tennessee, my office can review the agreement with you.

Educational disclaimer: This article provides general Tennessee educational information only and is not legal advice for any specific agreement, employee, or dispute.