On May 7, 2026, Tennessee Governor Bill Lee signed legislation barring the use of noncompete agreements for workers earning below a statutory wage threshold. The new law marks a meaningful shift in the state's approach to restrictive covenants and aligns Tennessee with a broader national trend of limiting noncompete obligations for lower-wage workers. Employers with operations or employees in Tennessee should treat the legislation as an immediate compliance priority.
The central feature of the new law is straightforward: noncompete agreements may no longer be imposed on Tennessee workers whose earnings fall below the statutory wage threshold. For employers, this means that the enforceability of certain existing restrictive covenants is now in question, particularly those signed by employees in entry-level, hourly, or mid-wage positions. Agreements that fail to satisfy the wage-based limits may be unenforceable, exposing employers to the risk that they cannot rely on those covenants to protect customer relationships, training investments, or other interests historically safeguarded through noncompetes.
Employers should begin by inventorying their current restrictive covenant portfolio. This review should encompass not only standalone noncompete agreements but also employment contracts, offer letters, equity award agreements, and any onboarding documents that incorporate noncompete language. Particular attention should be paid to template documents used at the point of hire, as continued use of noncompliant forms could compound exposure with every new employee who signs one. Human resources and talent acquisition teams should be promptly briefed so that onboarding packets are updated and distributed only after legal review confirms alignment with the new wage-based limits.
Employers may also wish to consider alternative protections that remain available, such as appropriately tailored nondisclosure, nonsolicitation, and confidentiality provisions, which can continue to play an important role in safeguarding legitimate business interests even when a noncompete is no longer permissible. Where existing covenants must be revisited, employers should plan for thoughtful internal and external communications to reduce uncertainty and minimize disruption to the workforce.
This alert is intended for general informational purposes only and does not constitute legal advice. Employers should consult qualified counsel for guidance tailored to their specific workforce, agreements, and circumstances.