New TN Laws Taking Effect July 1, Part 1: Operating Environment

During its 2026 regular session this past winter and spring, the 114th General Assembly passed hundreds of new laws. While many of these new laws became effective immediately after they were signed by Gov. Bill Lee over the past few months, many others did not take effect right away.

As the second half of the year begins, it’s time to take a look at new state laws which take effect today, July 1, 2026. In Part 1, we start with a review of new laws that will have a variety of effects on the operating environment for Tennessee business operators.

Labor & Employment

HB1034 (Public Chapter No. 934) – Restrictions on non-compete agreements

Sponsors – Rep. Rebecca Alexander (R-Jonesborough); Sen. Paul Bailey (R-Sparta)

• Establishes the criteria a court must follow in determining the reasonableness of the time period of a restrictive covenant sought to be enforced after the termination of an employment or business relationship.

• Prohibits non-compete agreements between an employer and employee whose annual compensation is less than $70,000. 

SB1981 (Public Chapter 845) – Workers compensation – attorney fee & cost awards

Sponsors – Sen. Richard Briggs (R-Knoxville); Rep. Justin Lafferty (R-Knoxville)

Adds a finding by a workers' compensation judge that an employer's conduct was unreasonable as a requirement for an award of attorneys' fees and costs incurred when an employer:

• unreasonably denies a workers' compensation claim, or

• unreasonably fails to timely initiate any of the benefits associated with the claim.

SB1587 (Public Chapter No. 1070) – Operation of commercial motor vehicles by persons unlawfully present in the United States

Sponsors – Sen. Jack Johnson (R-Franklin); Rep. Jason Zachary (R-Knoxville)

• Creates certain offenses for a person who is unlawfully present in the United States to operate a commercial motor vehicle in this state and for a direct employer of such person.

• Requires law enforcement agencies which arrest a person operating a commercial motor vehicle in Tennessee and who is unlawfully present in the United States to ensure that federal immigration authorities are notified.

• Creates strict liability for direct employers who knowingly employ and permit a person unlawfully present in the United States to operate a commercial motor vehicle.

• Creates related civil actions for persons who suffer personal injury or property damage caused by such operation by those unlawfully present.

SB2024 (Public Chapter No. 617) – Final pay for commission/piece-work employees

Sponsors - Sen. Shane Reeves (R-Murfreesboro); Rep. Rebecca Alexander (R-Jonesborough)

• Exempts from the requirement that wages earned by employees in private employment are due and payable no later than the fifth day of the succeeding month those employees who are employed on a piece-work or commission basis.

• Requires that compensation for such employees is due and payable by the last day of the succeeding month; makes certain other changes relative to employee compensation.

Business Regulations & Operating Environment

SB2466 (Public Chapter No. 871) – Fraudulent freight theft

Sponsors – Sen. Paul Bailey (R-Sparta); Rep. Pat Marsh (R-Shelbyville)

• Creates a new definition of "fraudulent freight theft" as the unlawful obtaining, control, diversion, or disposition of freight through deception, misrepresentation, impersonation, false pretenses, or identity fraud.

• Provides that fraudulent freight theft is punishable as theft under state property theft law.

SB2265 (Public Chapter No. 1124) – Organized Retail Theft

Sponsors – Sen. Brent Taylor (R-Memphis); Rep. Jason Zachary (R-Knoxville)

• Expands the offense of organized retail crime; increases the time period, from 90 days to 180 days, that acts in concert with one or more individuals to commit theft of merchandise over $1,000 can be considered organized retail crime.

• Implements a 30-day mandatory minimum sentence if a defendant used or possessed a firearm, ammunition, a firearm-related device, or anti-theft device during the commission of the offense.

HB2070 (Public Chapter No. 756) – Tennessee Energy Freedom Act

Sponsors – Rep. Chris Todd (R-Madison Co.); Sen. Shane Reeves (R-Murfreesboro)

• Establishes that it is the public policy of this state that people have the right to engage in and invest in companies that engage in the exploration, production, transportation, sale, manufacturing, refining, combustion, or other use of coal, oil, and natural gas in this state.

• Enacts several provisions which limit or prohibit legal actions against persons or companies based on emissions of carbon dioxide, methane, or nitrous oxide resulting from the above activities, plus several provisions which give such persons and companies new legal rights and protections.

HB548 (Public Chapter No. 768) – Tennessee Procurement Protection Act

Sponsors – Rep. Mark Cochran (R-Englewood); Sen. Paul Rose (R-Covington)

• Prohibits a company incorporated, domiciled, incorporated, issued, listed, headquartered, or based in, or controlled by or majority-owned or board-controlled by the government of, a country designated by the U.S. Dept. of Commerce as a foreign adversary from bidding on or submitting a proposal for a contract with state or local governments for information and communications technology.

• Foreign adversaries so defined by the U.S. Dept. of Commerce include China, Cuba, Iran, North Korea, Russia, and Venezuela’s Maduro regime.

SB866 (Public Chapter No. 684) – Statute of repose for claims re: improvements of real property

Sponsors – Sen. John Stevens (R-Huntingdon); Rep. Gary Hicks (R-Rogersville)

Specifies that a party filing a counterclaim, third-party complaint, or cross-claim related to the design, planning, supervision, or construction of an improvement of real property is not subject to the four-year statute of repose.

Check back on our blog soon for Part 2, which will focus on new laws taking effect July 1 that will have impacts on Tennessee's business climate over the long term.