The legal landscape surrounding non-compete agreements is shifting, and fast.

Tennessee employers accustomed to relying on non-compete clauses to safeguard proprietary information and client relationships may soon need to rethink their approach. A legislative study is underway, and proposed bills in the General Assembly signal a potential overhaul of how — and whether — non-competes can be enforced in our state.

Legislative Reform on the Horizon

In early 2025, the Tennessee General Assembly introduced House Bill 1034 and Senate Bill 995, which would broadly prohibit non-compete agreements for nearly all employees and contractors. If enacted, these bills would:

• Invalidate most non-compete clauses, regardless of duration or geographic scope.
• Eliminate carveouts for health care professionals, except for a narrow category of physicians employed by hospital-affiliated entities.

While the bills did not pass, and instead were deferred to the Banking and Consumer Affairs Subcommittee to Second Calendar of 2026, the National Federation of Independent Business (NFIB) and other stakeholders have called for further study, suggesting that Tennessee may follow the national trend toward limiting or banning non-competes altogether.

This mirrors developments at the federal level, where the Federal Trade Commission’s (FTC) 2024 rule banning most non-compete agreements was blocked in court but remains under appeal. The FTC has since launched a Joint Labor Task Force to investigate restrictive labor practices, including non-competes.

Current Law: What’s Still Enforceable?

Under existing Tennessee law, non-compete agreements are enforceable only if they meet strict criteria:

• Reasonableness in duration (typically six months to two years), geographic scope and scope of restricted activities.
• Adequate consideration, such as a promotion, bonus or specialized training — not just continued employment.
• Legitimate business interests, such as protecting trade secrets, confidential information or customer relationships.

Courts apply a reasonableness standard and may modify (“blue pencil”) overly broad agreements rather than invalidate them entirely. For a detailed breakdown, see LegalClarity’s guide.

Alternatives to Non-Competes: What Should Attorneys Recommend?

As the legal environment evolves, attorneys can help clients pivot to enforceable alternatives that protect business interests without running afoul of pending legislation.

1. Non-Disclosure Agreements (NDAs)

NDAs protect confidential information and trade secrets without restricting employment. They’re generally enforceable and less controversial than non-competes. Attorneys should ensure NDAs are:

• Specific in scope and duration.
• Aligned with the Tennessee Uniform Trade Secrets Act.
• Supported by clear definitions of what constitutes confidential information.

2. Non-Solicitation Clauses

These clauses prevent former employees from poaching clients or staff. Courts are more likely to enforce them if they’re narrowly tailored to:

• The employee’s role and relationships.
• Existing clients or employees, not prospective ones.
• A reasonable time frame (typically 12–24 months).

3. Garden Leave Provisions

A less common but effective tool, garden leave requires employees to remain on payroll during a notice period while refraining from competitive activity. This avoids post-employment restrictions and can be framed as a paid transition period.

Looking Ahead

Whether Tennessee enacts a full ban or opts for incremental reform, the message is clear: non-compete agreements are no longer a safe default. Employers must rethink how they protect their interests, and attorneys must be ready to guide that transition.

Tommy Fridy is a corporate associate in the Memphis office of Wyatt Tarrant & Combs LLP. He assists with counseling clients regarding mergers, acquisitions, dispositions and provides operational, regulatory and general transactional support. His practice also includes the development, leasing, acquisition and disposition of commercial real estate and lending.