by Robert S. Teachout, Brightmine Legal Editor
Employers in Tennessee soon will not be able to enforce a noncompetition agreement against an employee whose annual compensation is below a minimum salary threshold.
Under new law enacted by H.B. 1034, an employer cannot require, request or enforce a noncompete agreement with an employee whose annualized compensation is less than $70,000.
Annualized compensation means the total compensation an employee earns from the employer, including wages, salary, commissions, nondiscretionary bonuses and any other forms of remuneration, calculated on an annualized basis. For hourly employees, the annualized compensation is calculated by multiplying the employee’s hourly wage by 40 to determine the weekly wage and then multiplying the product by 52 weeks.
The enacted bill also establishes a statutory presumption that a time restraint of two years or less is reasonable for noncompete agreements with employees or independent contractors. In addition, the law explicitly authorizes courts to modify the terms of a restrictive covenant (blue pencil) to make them reasonable and enforceable.
Other states have also recently amended their noncompete laws. Maine and Utah bar noncompetes with health care providers and Maryland bans them for certain licensed architects.
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About the author
Robert S. Teachout, SHRM – SCP, Legal Editor
Robert Teachout has worked in legal publishing since 1990 covering employment laws on the federal, state and local level. At Brightmine, he covers labor relations, employment contracts and restrictive covenants, performance management, succession and workforce planning, employee engagement and retention, organizational exit and HR professional development. He often writes on the intersection of compliance with HR strategy and practice as editorial lead for Commentary and Insights and the Leading Practice Guides. He is also the host of the Brightmine webinar series.
Before joining Brightmine, Robert was a senior HR editor at Thompson Information Services, covering the FMLA, ADA, and EEO issues, along with federal and state leave laws. Prior to that he was the primary editor of Bloomberg BNA’s State Labor Laws binders and the principal writer and editor of the State Wage Assignment and Garnishment Handbook. Robert also served as a union unit leader and shop steward in the Washington-Baltimore Newspaper Guild of the Communications Workers of America. Actively involved in the HR profession, Robert is a member of SHRM at both the national and local levels and gives back to the profession by volunteering with his local chapter.
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