Bill > SB0995

This bill, concerning covenants not to compete in Tennessee, establishes new rules for enforcing agreements that restrict an individual's ability to practice their profession after their employment or business relationship ends. Specifically, it introduces a new section to Tennessee law that creates "rebuttable presumptions" about the reasonableness of the duration of such restrictive covenants, meaning courts will assume certain time limits are reasonable unless proven otherwise. For former employees or independent contractors, a restriction of two years or less is presumed reasonable, provided it's not tied to the sale of a business. For distributors, dealers, franchisees, lessees, or licensees, a three-year restriction is presumed reasonable, again, not associated with a business sale. When an owner or seller of a business is involved, a restriction of up to five years or the duration of payment periods is presumed reasonable. Importantly, this bill does not prevent employers from enforcing agreements related to confidentiality, customer non-solicitation, or employee non-solicitation. Furthermore, a significant provision prohibits employers from requiring, requesting, or enforcing a noncompete agreement against any employee whose total annual compensation, including wages, salary, commissions, and bonuses, is less than $70,000, with a specific calculation method for hourly employees. Any noncompete agreement violating this $70,000 threshold is considered void and unenforceable. The bill also allows courts to modify restrictive covenants to make them reasonable and enforceable, and it takes effect on July 1, 2026, applying to agreements made, renewed, or amended on or after that date.