Non-compete agreements continue to face increased scrutiny across the country, and Tennessee and Virginia are the latest states to make significant changes. New laws effective July 1, 2026, place additional restrictions on when businesses may use or enforce non-compete agreements.
For organizations with workers in either state, now is a good time to review existing agreements and templates to make sure they align with the new requirements.
TENNESSEE: NEW $70,000 COMPENSATION THRESHOLD
Tennessee now prohibits companies from requiring, requesting, or enforcing a non-compete agreement against a worker whose annualized compensation is less than $70,000. Agreements that violate this restriction are considered void and unenforceable.
The law defines annualized compensation broadly to include wages, salary, commissions, nondiscretionary bonuses, and other forms of compensation. For hourly workers, annualized compensation is calculated by multiplying the hourly rate by 40 hours and then by 52 weeks.
Tennessee also created new standards for evaluating the duration of restrictive covenants. For a former worker or independent contractor, a restriction of two years or less generally receives a rebuttable presumption of reasonableness as to duration, provided it is not associated with the same or ownership of a business. Courts may still modify a restrictive covenant governed by this provision to make it reasonable and enforceable.
Importantly, the law does not prevent businesses from using otherwise lawful confidentiality, nondisclosure, customer non-solicitation, or employee non-solicitation agreements.
The changes apply to agreements entered into, renewed, or amended on or after July 1, 2026, as well as proceedings occurring on or after that date.
VIRGINIA: EXPANDED PROTECTIONS FOR WORKERS
Virginia has also expanded its restrictions on non-compete agreements.
Virginia already prohibited non-competes for certain low-wage workers, with the law expanded in 2025 to include non-exempt workers entitled to overtime under the Fair Labor Standards Act.
Beginning July 1, 2026, Virginia added additional protections for workers. Non-compete agreements generally cannot be required or enforced against covered health care professionals, including certain professionals licensed, registered, or certified by Virginia's Boards of Medicine, Nursing, Counseling, Optometry, Psychology, or Social Work. This new protection does not invalidate, alter, or otherwise affect agreements entered into or renewed before July 1, 2026. The statute also preserves a limited exception for certain non-competes associated with the sale of a health care professional's business.
Virginia does not prohibit every post-termination non-solicitation provision. A narrowly drafted provision may restrict a former worker from actively soliciting the company’s customers or clients, but it cannot prevent the worker from serving a customer who approaches them without solicitation. The law also expressly permits certain narrowly tailored customer non-solicitation provisions for covered health care professionals. Employee non-solicitation provisions warrant separate review, particularly for low-wage and overtime-eligible workers, because they may be treated as prohibited non-competes.
Virginia also restricts enforcement when a worker is discharged. A non-compete is generally unenforceable when a company discharges a worker without providing severance benefits or another monetary payment, unless the worker is discharged for cause. The applicable severance or monetary payment must also be disclosed when the non-compete is executed. This new requirement does not alter agreements entered into, amended, or renewed before July 1, 2026.
Violations can carry significant consequences. Virginia law allows affected workers to pursue relief and authorizes civil penalties of $10,000 per violation for certain violations of the statute.
WHAT SHOULD BUSINESSES DO NOW?
Businesses with workers in Tennessee or Virginia should review their restrictive covenant templates and, depending on scope of workforce, may want to determine if a unified nationwide approach or state specific approach is best for the business.
In particular, organizations should consider:
As states continue to adopt different rules governing restrictive covenants, businesses should evaluate these agreements based on the law of the state where the individual works and revisit their templates as laws change.
When workers are engaged through an Employer of Record (EOR), the EOR can help manage this administrative burden by tracking relevant laws, reviewing client specific onboarding documents within its scope, and coordinating needed changes with the client.
HOW TCWGLOBAL CAN HELP
As the employer of record, TCWGlobal helps clients navigate the compliance implications of an evolving employment law landscape. We monitor regulatory developments, review applicable requirements, and help clients understand how changes to state laws may impact their contingent workforce and existing practices.
For more information on the various non‑compete rules across the U.S., check out our State‑by‑State Non‑Compete Resource.
Have questions about these changes or other state laws that may impact your contingent workforce? Contact us to discuss how our employer of record services can help simplify compliance and support your workforce needs.