Texas Statutes-Business and Commerce Code-Title 2-Chapter 15-Subchapter E. Covenants not to Compete

Section 15.50. Criteria for Enforceability of Covenants Not to Compete

(a) Notwithstanding Section 15.05, and subject to any applicable provision of Subsection (b) and Section 15.501, a covenant not to compete is enforceable if it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made to the extent that it contains limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee.

(b) A covenant not to compete relating to the practice of medicine is enforceable against a person licensed as a physician by the Texas Medical Board if such covenant complies with the following requirements:

(1) the covenant must:

(A) not deny the physician access to a list of the physician’s patients whom the physician had seen or treated within one year of termination of the contract or employment;

(B) provide access to medical records of the physician’s patients upon authorization of the patient and any copies of medical records for a reasonable fee as established by the Texas Medical Board under Section 159.008, Occupations Code; and

(C) provide that any access to a list of patients or to patients’ medical records after termination of the contract or employment shall not require such list or records to be provided in a format different than that by which such records are maintained except by mutual consent of the parties to the contract;

(2) the covenant must provide for a buyout of the covenant by the physician in an amount that is not greater that the physician’s total annual salary and wages at the time of termination of the contract or employment; and

(3) the covenant must provide that the physician will not be prohibited from providing continuing care and treatment to a specific patient or patients during the course of an acute illness even after the contract or employment has been terminated; and

(4) the covenant must:

(A) expire not later than the one-year anniversary of the date the contract or employment has been terminated;

(B) limit the geographical area subject to the covenant to no more than a five-mile radius from the location at which the physician primarily practiced before the contract or employment terminated; and

(C) have terms and conditions clearly and conspicuously stated in writing.

(b-1) For the purposes of Subsection (b), the practice of medicine does not include managing or directing medical services in an administrative capacity for a medical practice or other health care provider.

(d) Notwithstanding any other law, a covenant not to compete relating to the practice of medicine is void and unenforceable against a person licensed as a physician by the Texas Medical Board if the physician is involuntarily discharged from contract or employment without good cause. For purposes of this subsection, “good cause” means a reasonable basis for discharge of a physician from contract or employment that is directly related to the physician’s conduct, including the physician’s conduct on the job or otherwise, job performance, and contract or employment record.

(c) Subsection (b) does not apply to a physician’s business ownership interest in a licensed hospital or licensed ambulatory surgical center.

Section 15.501. Covenants not to compete against health care practitioners

(a) In this section, “health care practitioner” means:

(1) a person licensed by the State Board of Dental Examiners to practice dentistry in this state;

(2) a person licensed under Chapter 301, Occupations Code, to engage in professional or vocational nursing; or

(3) a physician assistant licensed under Chapter 204, Occupations Code.

(b) A covenant not to compete relating to the practice of dentistry or nursing, or practice as a physician assistant, as applicable, is not enforceable against a health care practitioner unless the covenant:

(1) provides for a buyout of the covenant by the health care practitioner in an amount that is not greater than the practitioner’s total annual salary and wages at the time of termination of the practitioner’s contract or employment;

(2) expires not later than the one-year anniversary of the date the contract or employment has been terminated;

(3) limits the geographical area subject to the covenant to no more than a five-mile radius from the location at which the health care practitioner primarily practiced before the contract or employment terminated; and

(4) has terms and conditions that are clearly and conspicuously stated in writing.

Section 15.51. Procedures and Remedies in Actions to Enforce Covenants Not to Compete

(a) Except as provided in Subsection (c) of this section, a court may award the promisee under a covenant not to compete damages, injunctive relief, or both damages and injunctive relief for a breach by the promisor of the covenant.

(b) If the primary purpose of the agreement to which the covenant is ancillary is to obligate the promisor to render personal services, for a term or at will, the promisee has the burden of establishing that the covenant meets the criteria specified by Section 15.50 of this code. If the agreement has a different primary purpose, the promisor has the burden of establishing that the covenant does not meet those criteria. For the purposes of this subsection, the “burden of establishing” a fact means the burden of persuading the triers of fact that the existence of the fact is more probable than its nonexistence.

(c) If the covenant is found to be ancillary to or part of an otherwise enforceable agreement but contains limitations as to time, geographical area, or scope of activity to be restrained that are not reasonable and impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee, the court shall reform the covenant to the extent necessary to cause the limitations contained in the covenant as to time, geographical area, and scope of activity to be restrained to be reasonable and to impose a restraint that is not greater than necessary to protect the goodwill or other business interest of the promisee and enforce the covenant as reformed, except that the court may not award the promisee damages for a breach of the covenant before its reformation and the relief granted to the promisee shall be limited to injunctive relief. If the primary purpose of the agreement to which the covenant is ancillary is to obligate the promisor to render personal services, the promisor establishes that the promisee knew at the time of the execution of the agreement that the covenant did not contain limitations as to time, geographical area, and scope of activity to be restrained that were reasonable and the limitations imposed a greater restraint than necessary to protect the goodwill or other business interest of the promisee, and the promisee sought to enforce the covenant to a greater extent than was necessary to protect the goodwill or other business interest of the promisee, the court may award the promisor the costs, including reasonable attorney’s fees, actually and reasonably incurred by the promisor in defending the action to enforce the covenant.

Section 15.52. Preemption of Other Law

The criteria for enforceability of a covenant not to compete provided by Sections 15.50 and 15.501 and the procedures and remedies in an action to enforce a covenant not to compete provided by Section 15.51 are exclusive and preempt other law, including common law.

See https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm

This law was amended in 2025 by SB 1318 (2025). See https://capitol.texas.gov/BillLookup/History.aspx?LegSess=89R&Bill=SB1318