Two New Non-Compete Laws Take Effect in Virginia and Tennessee
Non-compete agreements are facing mounting scrutiny nationwide, and July 2026 brings two more data points to that trend. As of July 1, 2026, employers with workers in Virginia and Tennessee face new restrictions on non-compete agreements, following legislation both states enacted this spring. For employers with multi-state workforces, these changes carry real stakes: existing agreements may become unenforceable with little warning, and compliance requirements continue to diverge from state to state.
Virginia enacted Senate Bill 170, adding a new enforceability condition for non-competes. Under the new law, a post-employment non-compete is unenforceable against an employee terminated without cause unless the employer provides severance benefits or other monetary payment and discloses that payment at the time the non-compete agreement itself is executed, rather than at the time of termination. The law layers on top of Virginia’s existing ban on non-competes for low-wage and non-exempt employees, and applies to any agreement entered, amended, or renewed on or after July 1, 2026. The statute does not define “cause” or “severance benefits.”
Tennessee enacted House Bill 1034, rendering non-competes void for employees earning less than $70,000 in annualized compensation. For employees above that threshold, the law also includes provisions designed to improve the predictability and enforceability of restrictive covenants by creating rebuttable presumptions of temporal reasonableness: two years or less for employees and contractors, three years for distributors and franchisees, and five years in sale-of-business contexts. Non-solicitation and confidentiality agreements are not subject to these changes. The law also gives courts express authority to blue-pencil (that is, modify or narrow) overbroad covenants rather than void them outright.
The Bigger Picture
These two developments in Virginia and Tennessee are part of a wave of broader changes to non-compete regulation across the country. For example, Washington’s near-total ban, enacted in March 2026, is scheduled to take effect in June 2027. Currently, thirty-four states and the District of Columbia impose some form of restriction on non-compete agreements. With a majority of states now regulating non-competes in some form, employers with even a modest multi-state footprint are increasingly likely to be navigating several different compliance regimes at once. Additionally, although the FTC’s proposed nationwide ban was invalidated, the agency continues to scrutinize restrictive covenants through case-by-case enforcement actions.
Given these developments, multi-state employers should consider taking the following steps: (1) audit existing restrictive covenants to identify which states they reach and where compliance gaps may exist; (2) confirm salary thresholds and other jurisdiction-specific requirements are current; and (3) revisit severance and disclosure language to align with new state requirements.
As we anticipate additional changes in the non-compete landscape across the country, we welcome the opportunity to discuss how these evolving laws may affect your workforce.
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