Key Takeaways

• States continue to restrict non-compete agreements. Virginia and Tennessee have both enacted new laws effective July 1, 2026, reflecting a national trend toward limiting enforceability while preserving employers’ ability to use confidentiality and non-solicitation agreements.
• Common themes in recent state legislation include compensation thresholds below which non-competes are unenforceable, enhanced employee remedies and penalties for violations and preservation of other restrictive covenants such as confidentiality and non-solicitation agreements.
• Employers with workers in multiple states should review the patchwork of state non-compete laws and consider working with counsel to develop compliant, jurisdiction-specific agreements.

Overview

Non-compete agreements continue to face increased scrutiny at the state level. Following years of growing restrictions—including expanded protections for low-wage workers and heightened enforcement mechanisms—Virginia and Tennessee have each enacted significant new legislation that takes effect on July 1, 2026. These laws join those in a number of states moving toward limiting the scope and enforceability of non-compete agreements while preserving employers’ ability to protect legitimate business interests through other means.

Virginia’s new law conditions enforceability on severance for employees discharged without cause, extends civil enforcement rights to all employees and imposes significant penalties for violations. Tennessee’s new law establishes a compensation threshold below which non-competes are unenforceable, creates duration presumptions and codifies courts’ authority to modify overbroad covenants. Both states preserve employers’ ability to use confidentiality, customer non-solicitation, and employee non-solicitation agreements.

Notably, not all states are moving in the same direction. While jurisdictions like Virginia, Tennessee, and Washington State (discussed in our prior client alert, available here¹) have enacted increasingly restrictive measures, Florida has taken the opposite approach. The Florida CHOICE (Contracts Honoring Opportunity, Investment, Confidentiality and Economic Growth) Act, effective July 1, 2025, permits covered garden leave agreements and covered noncompete agreements of up to four years to protect confidential information and customer relationships. The Act applies to employees earning more than twice the annual mean wage of the applicable Florida county (excluding health care practitioners) and expressly provides that such agreements do not violate public policy as a restraint of trade when certain procedural and substantive requirements are met. Employers with multi-state operations should be aware that these divergent trends create an increasingly complex compliance landscape.

Virginia

On April 13, 2026, Governor Abigail Spanberger signed SB 170, further restricting non-competes under Va. Code § 40.1-28.7:8, effective July 1, 2026. Under SB 170, a non-compete is unenforceable against any employee discharged without cause unless the employer provides severance or other monetary payment disclosed when the covenant is signed. This prohibition applies to all employees—not just low-wage workers. The existing prohibition on non-competes for low-wage employees remains intact regardless of any severance offered.

SB 170 extends civil enforcement rights to all employees. Any employee may sue a former employer for attempting to enforce a non-compete in violation of the law, subject to a two-year statute of limitations. Courts may void the agreement and order injunctive relief, liquidated damages, lost compensation, attorney fees and expert witness fees. Violations carry a $10,000 civil penalty per violation, and employers must post the statute (or a Department-approved summary) in the workplace. The law is not retroactive, but any amendment or renewal on or after July 1, 2026 will subject the agreement to the new requirements.

Employers may still enforce non-competes against employees discharged for cause. The statute also preserves nondisclosure agreements protecting trade secrets, proprietary information and confidential information, and excludes from the definition of “covenant not to compete” restrictions on serving customers the employee did not solicit.

Tennessee

On May 7, 2026, Governor Bill Lee signed House Bill 1034, effective July 1, 2026 for any non-compete entered into, renewed, or amended on or after that date. Employers may not require, request, or enforce a non-compete against any employee earning less than $70,000 in annualized compensation (wages, salary, commissions and nondiscretionary bonuses). Non-competes below this threshold are void and unenforceable. The statute does not expressly include discretionary bonuses or equity compensation, which may affect whether certain employees meet the threshold.

The law creates rebuttable presumptions for non-compete durations: two years or less is presumed reasonable for employees and independent contractors; three years or less for distributors, dealers, franchisees and certain licensees; and the longer of five years or the payment period for sale-of-business transactions. Courts have express statutory authority to “blue pencil” overbroad covenants—modifying them to be reasonable rather than invalidating them entirely—though judicial reformation should not be treated as a guaranteed backstop for aggressive drafting.

The law does not restrict other types of restrictive covenants. Confidentiality agreements, customer non-solicitation agreements and employee non-solicitation agreements remain fully enforceable, provided they are reasonable in scope.

What Employers Should Do Now

With July 1, 2026 approaching, employers should:

• Audit existing non-compete agreements and identify any that need revision. Agreements renewed or amended after July 1, 2026 will be subject to the new requirements.
• In Virginia: Evaluate whether non-competes include required severance disclosures and post the required workplace notice.
• In Tennessee: Verify employees subject to non-competes meet the $70,000 threshold and that durations fall within presumptively reasonable periods.
• Consider alternative protections such as confidentiality and non-solicitation agreements.

Our team is available to advise on practical steps for compliance with these new laws. We invite you to reach out to us if you have any questions or would like to discuss how these changes may impact your business.

1 Washington State Enacts Near-Total Ban on Non-Compete Agreements | Akin