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Rep. Rebecca Alexander’s bill narrows enforceable noncompetes, sets time limits
Summary
The Banking & Consumer Affairs subcommittee approved House Bill 1034 (with amendment 2379), which sets rebuttable presumptions for reasonable noncompete durations, limits some noncompetes by pay threshold, and lets courts modify restrictive covenants instead of voiding them. Vote: 6-0.
Representative Rebecca Alexander, sponsor of House Bill 1034, told the subcommittee her amendment (No. 2379) creates “clear and predictable rules for non compete duration” to reduce uncertainty for employers and employees.
Alexander described a constituent in his 50s who lost a medical sales position during a company reorganization and was held to a two-year noncompete while receiving only one year of severance, leaving him unable to return to his field. Alexander said the amendment establishes rebuttable presumptions that a restrictive covenant is reasonable: up to two years for employee noncompetes, up to three years for distributors, franchisees, dealers or licensees, and up to five years for covenants tied to the sale of a business. She also told the committee the bill would prohibit noncompete agreements for employees earning $70,000 (the sponsor’s spoken phrasing was partially garbled in the transcript). Courts would retain authority to modify covenants to make them reasonable rather than automatically voiding them.
The sponsor said she worked over the summer with stakeholders including the Tennessee Chamber of Commerce, the NFIB and representatives of the music industry and modeled the proposal on a neighboring state’s law adapted to Tennessee. Representative Vaughn asked whether the law would affect existing noncompete contracts; committee members and the sponsor confirmed the bill would not supersede already-agreed private contracts until they are renewed or a new agreement is entered. Representative Hammer and others spoke in support, calling the measure a “first step” toward fairness for small-business owners and employees.
The subcommittee approved the amended bill by a voice vote; the clerk reported 6 ayes and 0 nays. The measure was reported to the Commerce committee.
What happens next: the bill, as amended, will move to the Commerce committee for further consideration.
