Tennessee Employment Contract Review
Tennessee rewrote its non-compete rules in 2026. Governor Bill Lee signed HB 1034 on May 7, 2026, and for agreements entered into, renewed or amended on or after July 1, 2026, employers cannot require, request or enforce a non-compete with a worker earning under $70,000 a year. Tennessee also has one of the more employer-friendly final-pay deadlines, which can stretch to 21 days.
Non-compete in Tennessee
Limited, enforceable only in narrow cases
Typical enforceable duration: ~2 years
Are non-competes enforceable in Tennessee?
Here is Tennessee non-compete law in plain English, with the statute it rests on.
For agreements made on or after July 1, 2026, non-competes are banned for workers earning under $70,000 a year, and a restraint of 2 years or less is presumed reasonable (HB 1034). Earlier agreements follow prior case law; physicians have separate statutory limits.
Governing law: Tennessee Code §§50-1-210 and 50-1-211 (HB 1034, 2026).
Whatever the label in your contract, Tennessee courts look at whether the restriction is reasonable in duration, geography, and scope. A nationwide, multi-year, whole-industry ban is far more likely to be narrowed or struck down than a narrow one.
Who owns what you invent in Tennessee?
Tennessee does not have a specific personal-invention carve-out statute, so a broad IP-assignment clause can reach more of what you create, potentially including side projects. Read the assignment scope and push to limit it to work actually related to your job.
Arbitration and class-action waivers in Tennessee
Tennessee generally follows the federal rule that arbitration agreements are enforceable. Before you sign, check whether the clause is mutual and whether it waives your right to a class or collective action, you are usually giving up the right to sue in court.
How does Tennessee's 2026 non-compete law work?
Annualized compensation includes wages, salary, commissions, nondiscretionary bonuses and other pay from the employer. For hourly workers it is calculated as the hourly rate times 40 hours times 52 weeks, which puts the cutoff at roughly $33.65 an hour.
Above the threshold, the law sets rebuttable presumptions: a restriction of two years or less is presumed reasonable for former employees and contractors, three years for distributors and franchisees, and the longer of five years or the payout period for covenants tied to the sale of a business or equity. Confidentiality, customer non-solicitation and employee non-solicitation agreements remain allowed. Agreements signed before July 1, 2026 stay under prior law unless they are renewed or amended.
When must a Tennessee employer pay you after you leave?
Under Tenn. Code Ann. 50-2-103(g), final wages are due by the next regular payday or within 21 days of separation, whichever is later, whether you quit or were fired. Payout of unused vacation depends on the employer's written policy.
Physicians have their own statute, Tenn. Code Ann. 63-1-148, which limits physician non-competes to two years and specific geographic areas.
Tennessee's Public Protection Act (Tenn. Code Ann. 50-1-304) also protects employees fired solely for refusing to participate in, or to remain silent about, illegal activities, which is the main statutory exception to at-will employment in the state.
Tennessee sources checked 2026-10-09: McDonald Hopkins, Tennessee bans non-competes based on employee income · Morgan Lewis, Tennessee enacts significant changes to noncompete law through HB 1034. Laws change; confirm the current rule before relying on it.
What ClauseAudit checks in a Tennessee employment contract
- Non-compete enforceability under Tennessee law and whether the scope is reasonable
- IP / invention-assignment scope and any personal-time carve-out
- Mandatory arbitration and class-action waiver
- At-will terms and asymmetric notice or severance
- Equity vesting, cliffs, and bad-leaver forfeiture
- Discretionary bonus criteria and clawback provisions
Tennessee employment contract FAQ
Are non-competes enforceable in Tennessee?
In Tennessee, non-competes are enforceable only in limited circumstances under Tennessee Code §§50-1-210 and 50-1-211 (HB 1034, 2026). For agreements made on or after July 1, 2026, non-competes are banned for workers earning under $70,000 a year, and a restraint of 2 years or less is presumed reasonable (HB 1034). Earlier agreements follow prior case law; physicians have separate statutory limits.
Can my Tennessee employer own inventions I make on my own time?
Tennessee does not have a specific statute carving out personal-time inventions, so a broad IP-assignment clause can reach more of what you create. Read the assignment scope carefully and ask to limit it to work related to your job.
Do I have to sign a mandatory arbitration agreement in Tennessee?
Tennessee generally follows the federal rule that arbitration agreements are enforceable. Check whether the clause is mutual and whether it waives your right to a class action, and know that you are usually giving up the right to sue in court. Everywhere in the US, the federal Ending Forced Arbitration Act lets you take sexual harassment and sexual assault claims to court even if you signed one.
How long can a non-compete last in Tennessee?
Courts in Tennessee have treated ~2 years as the outer edge of what is typically reasonable for an employee. Duration is only one factor: geography and the scope of restricted activity are weighed alongside it, and a term that is reasonable for a senior employee may not be for a junior one.
What if I work in Tennessee but my employer is in another state?
It matters, because Tennessee's neighbours do not all treat non-competes the same way: Alabama (generally enforceable), Arkansas (generally enforceable), Georgia (generally enforceable), Kentucky (generally enforceable), Mississippi (generally enforceable), Missouri (generally enforceable), North Carolina (generally enforceable). Which state's law applies turns on the governing-law and venue clauses in your contract and on where the work is actually performed, so those two clauses are worth reading closely before you sign.
If a Tennessee non-compete is too broad, does it get narrowed or thrown out?
Courts may rewrite an overbroad restriction to something reasonable. That cuts against you: an employer has little to lose by drafting wide, because a court can pare the clause back rather than discard it. Negotiating the wording before signing matters more here than in states where an overbroad clause simply fails.
Is there anything specific to Tennessee worth knowing?
HB 1034, signed 7 May 2026, voids non-competes for workers earning under $70,000 annualised, for agreements entered on or after 1 July 2026. A restraint of two years or less is presumed reasonable.
What else should I check in a Tennessee employment contract?
Beyond the non-compete: how invention assignment is worded and whether it reaches work done on your own time; whether disputes go to arbitration and whether class actions are waived; whether notice periods are symmetrical between you and the employer; and how any equity vests, including what happens if you leave before a cliff.
My Tennessee non-compete was signed in 2024. Does the $70,000 rule apply?
Not automatically. HB 1034 applies to agreements entered into, renewed or amended on or after July 1, 2026. A 2024 agreement remains under the earlier reasonableness test. But if your employer asks you to sign an updated version after July 1, 2026, the new rules, including the $70,000 floor, apply to that new agreement.
Do bonuses count toward Tennessee's $70,000 threshold?
Nondiscretionary bonuses do. Annualized compensation includes wages, salary, commissions, nondiscretionary bonuses and other remuneration from the employer. A purely discretionary bonus is less clearly included. If you are close to the line, ask the employer how it calculated your annualized pay before signing.
Have a Tennessee offer in hand?
Upload it and get every clause checked against Tennessee law in about a minute, with a fix for each problem.
Tennessee: the governing law
- Statute
Tenn. Code Ann. §§ 50-1-210, 50-1-211- If the clause is too broad
- Courts may rewrite an overbroad restriction to something reasonable.
- Worth knowing
- HB 1034, signed 7 May 2026, voids non-competes for workers earning under $70,000 annualised, for agreements entered on or after 1 July 2026. A restraint of two years or less is presumed reasonable.
Statute and reformation approach from Beck Reed Riden LLP, Employee Noncompetes: A State-by-State Survey, 2026-01-21. Verify against the current text before relying on it.
How Tennessee compares with neighbouring states
Tennessee does not treat non-competes the same way as every state it borders, which matters when a contract names another state's law. 7 of its 8 neighbours take a different approach.
Nationally: 4 jurisdictions treat employee non-competes as void, 13 allow them only in limited circumstances, and 34 generally enforce them if reasonable.
State law summarized as of 2026-10-09; statutes change frequently. This is Automated educational information, not legal advice. Always consult a qualified Tennessee attorney before signing.