Reformation (of a Covenant Not to Compete)

An overbroad non-compete in Texas does not simply fail. The court cuts it down and enforces what is left. That single feature separates Texas from states where an unreasonable restraint is void, and it shapes drafting and litigation on both sides.

The statute is mandatory

Tex. Bus. & Com. Code § 15.51(c) provides that if a covenant 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 promisee's goodwill or other business interest, the court shall reform the covenant to the extent necessary and enforce it as reformed. That is not discretionary language. A trial court that responds to an overbroad covenant by refusing to enforce it at all has not applied the section.

The business court applied it that way in Galderma Laboratories, L.P. v. Brenner, 2026 Tex. Bus. 12 (8th Div. Mar. 12, 2026) (mem. op.). Granting a temporary injunction, the court said that where a covenant is overbroad, the court "must narrow it rather than invalidate it." It struck the phrase "owning, operating, or managing a business that is a Competitor" from the definition of competitive activity and removed from the restricted area the territories the former executive had merely received confidential information about. As reformed, the covenant barred him for twelve months only from roles the same as or substantially similar to those he had held, within the U.S. market for hyaluronic acid dermal fillers.

The price the employer pays

Reformation is not free. The same subsection provides that the court may not award the promisee damages for a breach of the covenant occurring before reformation, and the relief granted to the promisee is limited to injunctive relief. And where the primary purpose of the agreement was to obligate the promisor to render personal services, and the promisor proves the promisee knew at the time of execution that the covenant contained unreasonable limitations and sought to enforce it to a greater extent than was necessary, the court may award the promisor costs including reasonable attorney's fees.

Read together, the two consequences discourage overreach. An employer that uses a nationwide, five-year, all-activities covenant for every salesperson gives up damages for breaches before reformation and, if the employee proves the employer knew the limits were unreasonable and sought to enforce them beyond what was necessary, risks a fee award.

What reformation cannot fix

Section 15.51(c) repairs unreasonable limitations. It does not repair a covenant that fails the threshold requirements of § 15.50, which asks whether the covenant is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made. Marsh USA Inc. v. Cook, 354 S.W.3d 764 (Tex. 2011), loosened how tightly the consideration must relate to the restraint, holding that stock options granted to link an employee's interest to company goodwill could support a covenant. But a covenant with no otherwise enforceable agreement behind it is unenforceable, and no amount of judicial narrowing changes that.

Burden of proof follows the same division. Where the agreement's primary purpose is to obligate the promisor to render personal services, the party seeking enforcement carries the burden on the § 15.50 criteria. Otherwise the burden sits with the party resisting enforcement.

Many covenants include a severability and reformation clause, though section 15.51(c) requires reformation whether or not the contract has one.