Employer of Record ยท Tennessee
Tennessee is one of the most business-friendly states in the US - no income tax on wages, strong at-will protections, and a booming economy anchored by Nashville's tech and healthcare sectors and Memphis's logistics hub. But Tennessee's workers' comp threshold (5 employees), TLEA E-Verify mandate, and Wage Regulation Act create real compliance obligations for out-of-state companies hiring here. WorkGenius becomes your legal employer and manages every Tennessee obligation from day one.
Facts reviewed against primary sources in September 2026
| Requirement | Tennessee | Detail |
|---|---|---|
| Minimum wage | $7.25/hr | Tennessee follows the federal minimum - no state increase above $7.25/hr |
| State income tax | None | Tennessee has never taxed wages or salaries; the Hall Income Tax on investment income was fully repealed in 2021 |
| Workers' compensation | 5+ employees | T.C.A. 50-6-102(11) sets the threshold at 5 or more employees, dropping to 1 or more in construction and coal mining. Sole proprietors, partners and certain family members are excluded from the count |
| Final paycheck | Next payday | T.C.A. 50-2-103 makes final wages due on the next regular payday or 21 days after separation, whichever is later - so the deadline can fall after the next payday, not before it |
| THRA coverage threshold | 8+ employees | Tennessee Human Rights Act applies to employers with 8 or more employees - lower than the federal 15-employee threshold |
| E-Verify (TLEA) | 35+ FTE | Tennessee Lawful Employment Act requires E-Verify for employers with 35 or more full-time equivalent employees, for hires on or after January 1, 2023. Smaller employers may either use E-Verify or retain copies of qualifying documents |
The Defining Law
The Tennessee Lawful Employment Act (TLEA) goes significantly further than the federal I-9 requirement. Since January 1, 2023, T.C.A. 50-1-703(b) requires every private employer with 35 or more full-time equivalent employees to use E-Verify for employees hired on or after that date. Employers under 35 FTE may choose either option the statute allows: use E-Verify, or retain copies of qualifying identity and work authorization documents. Sole proprietors with no employees are exempt. For out-of-state companies hiring in Tennessee for the first time - particularly in Nashville's fast-growing tech sector or Memphis's distribution industry - this is the compliance requirement most often missed before a first hire.
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Tennessee Coverage
Tennessee is business-friendly - but workers' comp at 5 employees, TLEA E-Verify mandates, and the Wage Regulation Act carry real compliance risk for the unprepared.
Tennessee requires workers' comp coverage at just 5 employees (1 in construction and mining). WorkGenius maintains coverage for every Tennessee employee, so you're never exposed as headcount crosses the threshold.
WorkGenius runs E-Verify for every new Tennessee hire and maintains compliant documentation records under the Tennessee Lawful Employment Act - covering both the mandatory E-Verify tier at 35 or more full-time equivalent employees and the document-retention option below it.
The Tennessee Wage Regulation Act requires wages to be paid on the regular payday established by the employer. WorkGenius manages pay frequency, final paycheck timing (next regular payday), and all required wage statements under state law.
Tennessee Department of Labor unemployment insurance contributions calculated and remitted on every payroll cycle. New employer rate is 2.7% on the first $7,000 of each employee's wages.
The THRA applies to employers with 8 or more employees - lower than the federal 15-employee threshold. WorkGenius employment agreements and policies reflect all THRA anti-discrimination requirements from the moment you cross 8 employees.
ACA-compliant health coverage, 401(k), PTO, and disability insurance - all enrolled and administered. Tennessee's no-income-tax environment makes total compensation packages highly competitive. At offboarding, final pay on the next regular payday, COBRA, and compliant separation documentation.
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Most EOR providers miss Tennessee's workers' comp threshold of 5 employees, which drops to 1 in construction and mining, and the E-Verify mandate under the Tennessee Lawful Employment Act, which dropped to 35 full-time equivalent employees in 2023. WorkGenius handles TLEA compliance, workers' comp, Wage Regulation Act requirements, and SUTA contributions directly in the platform - automatically, on every payroll cycle.
Tennessee is one of the most employer-friendly states - but several important obligations apply that catch out-of-state companies off guard.
Tennessee has its own WARN law covering a band federal WARN does not reach: employers with at least 50 but not more than 99 full-time employees at a Tennessee workplace. It is triggered by a closure, modernisation or reduction in operations affecting 50 or more employees, and requires notice to the Tennessee Department of Labor and Workforce Development. A mid-sized employer can sit below the federal 100-employee threshold and still be covered here. WorkGenius flags it before any Tennessee workforce reduction.
The TLEA requires employers with 35 or more full-time equivalent employees to use E-Verify for hires on or after January 1, 2023, and lets employers below that threshold either use E-Verify or retain copies of qualifying identity and work authorization documents. Violations can result in civil penalties and suspension of state licenses. WorkGenius handles E-Verify and document retention for all Tennessee employees as the employer of record.
Unlike most states where workers' comp thresholds are higher, Tennessee mandates coverage once you reach 5 employees. Construction and mining employers are required to carry coverage from the very first employee. WorkGenius provides workers' comp coverage for every Tennessee hire - eliminating any exposure as your Tennessee workforce grows.
Tennessee employers must establish regular paydays and pay employees on those designated days. Final wages are due on the next regular payday after separation - there is no accelerated same-day or 6-day deadline as in some other states. The Tennessee Department of Labor enforces the Wage Regulation Act and can assess back wages and civil penalties for violations.
The THRA prohibits discrimination based on race, creed, color, religion, sex, age and national origin. Disability is not a THRA employment protection - it is covered separately by the Tennessee Disability Act, which is a common point of confusion. Federal law adds the ADA. Disability. It applies to employers with 8 or more employees - a lower threshold than the federal Title VII and ADA (both 15 employees). Tennessee has no non-compete statute for general employees. Restrictive covenants are governed by common law: under Hasty v. Rent-A-Driver, Inc. (Tenn. 1984) they are disfavored and enforceable only where the employer shows a legitimate protectable business interest and the restraint is reasonable in time and territory.
Simple Process
Once the offer is signed, your new hire is set up and payroll-ready within 24 hours.
Workers, roles, locations, and start dates. We tailor the setup to your needs.
Our AI runs every worker through Tennessee's classification and compliance rules. We prepare compliant contracts and payroll setup.
Onboarded with Tennessee-compliant contracts, benefits enrolled, payroll running from day one.
Payroll runs on Tennessee rules. Taxes filed. Compliance monitored. One weekly invoice.
Correct. Tennessee has never imposed a state income tax on wages or salaries. The only state-level income-adjacent tax was the Hall Income Tax, which applied to investment income (dividends and interest) only - and that was fully repealed effective January 1, 2021. Tennessee employees receive their full gross wages minus only federal income tax, Social Security, and Medicare. This is a significant competitive advantage for attracting talent to the state and makes Tennessee payroll simpler than most other states. WorkGenius handles all federal withholding and Tennessee-specific payroll obligations, but there is no state income tax to remit.
Since January 1, 2023, the Tennessee Lawful Employment Act requires every private employer with 35 or more full-time equivalent employees to use the federal E-Verify system for employees hired on or after that date. The threshold was 50 before 2023; it was lowered by 2022 Public Chapter 832. This goes beyond the federal I-9 requirement, which applies nationwide but does not mandate E-Verify for most private employers. Employers under 35 full-time equivalent employees may choose either option the statute allows: use E-Verify, or retain copies of qualifying identity and work authorization documents. Sole proprietors without employees are exempt. WorkGenius runs E-Verify for every Tennessee hire as the legal employer of record, ensuring full TLEA compliance.
Tennessee requires workers' compensation insurance once an employer has 5 or more employees. This is a lower threshold than many states, and it catches out-of-state companies off guard when they hire their fourth or fifth person in Tennessee. Construction and mining employers must carry coverage from the very first employee. WorkGenius maintains workers' comp coverage for every Tennessee employee from day one - so you're never exposed as your Tennessee headcount grows past the 5-employee threshold.
Under the Tennessee Wage Regulation Act, final wages are due on the next regular payday after an employee's separation - whether by termination, layoff, or resignation. Tennessee does not have an accelerated same-day or 6-day deadline like California or Texas. However, the next-payday rule must be strictly observed; late final pay can result in wage claims filed with the Tennessee Department of Labor and civil penalties. WorkGenius manages final paycheck timing and all required offboarding documentation.
Tennessee is consistently ranked as one of the strongest at-will employment states in the US. Employers can terminate employees for any reason or no reason, without notice, as long as the reason is not illegal (e.g., discrimination or retaliation). Tennessee courts apply a narrow public policy exception - the Retaliatory Discharge doctrine - but it is interpreted restrictively. There is no implied covenant of good faith and fair dealing in Tennessee employment, and the state has preempted local governments from enacting employment protections above the state level.
Yes. The Tennessee Human Rights Act (THRA) applies to employers with 8 or more employees, compared to the 15-employee threshold for federal Title VII and the Americans with Disabilities Act. This means Tennessee's anti-discrimination law kicks in at a lower headcount. The THRA prohibits discrimination based on race, creed, color, religion, sex, age, national origin, and disability. WorkGenius employment agreements and HR policies comply with THRA requirements from the moment your Tennessee workforce reaches 8 employees.
WorkGenius handles worker classification, Tennessee payroll, benefits, and every other compliance requirement so you don't have to. Get started today.
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