open-agreements 0.7.6 → 0.7.7

package/skills/non-compete-contract-explainer/content/texas.md

@@ -0,0 +1,297 @@
+---
+jurisdiction: "Texas"
+slug: texas
+countryCode: US
+snapshotAsOf: "2026-06-08"
+lastReviewed: "2026-06-03"
+canonicalUrl: https://openagreements.org/legal/non-compete/texas
+license: CC BY 4.0
+stale: false
+---
+
+> [!IMPORTANT]
+> **Informational only — not legal advice.** This is a snapshot of an OpenAgreements practice note,
+> provided for general information. It is not legal advice, does not create an attorney-client
+> relationship, and is not a substitute for a licensed attorney in the relevant jurisdiction.
+> Laws change; verify against the canonical version before relying on it.
+>
+> **Canonical:** https://openagreements.org/legal/non-compete/texas · **Snapshot as of:** 2026-06-08 · License: CC BY 4.0 · © UseJunior
+
+# Non-Competes in Texas[^about]
+
+A question-by-question summary of Texas non-compete law under the Covenants Not to Compete Act, Tex. Bus. & Com. Code §§ 15.50–15.52, including the ancillary-agreement requirement, the Light–Sheshunoff–Marsh consideration line, the reasonable time-geography-scope test, mandatory reformation of overbroad covenants, the pre-reformation damages bar, the attorney's-fee preemption question, the physician and SB 1318 health-care-practitioner limits, choice-of-law and forum rules, tolling, and trade-secret alternatives.
+
+
+## At a glance
+
+| Question | Texas |
+| --- | --- |
+| **Are non-competes enforceable?** | Allowed if reasonable |
+| **Bottom line** | Texas enforces non-competes that are ancillary to an otherwise enforceable agreement and reasonable in time, geography, and scope, with overbroad covenants reformed rather than voided. |
+| **Main law or case** | Tex. Bus. & Com. Code § 15.50 (Covenants Not to Compete Act) |
+| **Main exceptions** | Physician buyout/1-yr limits & good-cause rule (§ 15.50(b),(d)); dentist/nurse/PA buyout limits (§ 15.501) |
+| **Can a court narrow it?** | Yes — rewrites to reasonable |
+| **Applies to contractors?** | Unclear |
+| **Restriction extended during a breach?** | Unsettled — any extension must satisfy § 15.50(a) reasonableness |
+| **Maximum length set by law** | No statutory limit (1 year for covered physicians/health-care) |
+
+## Are employee non-compete agreements enforceable in Texas? {#employee-noncompetes}
+
+**Short answer.** Yes, within statutory limits. Texas is a reasonableness state: a non-compete is enforceable when it is ancillary to or part of an otherwise enforceable agreement and is limited as to time, geographic area, and scope of activity in a way that is reasonable and no broader than necessary to protect the employer's goodwill or other business interest [^bc-1550a-test].
+
+Unlike states that void most worker non-competes outright, Texas enforces them when they satisfy a single statute, the Covenants Not to Compete Act, Tex. Bus. & Com. Code §§ 15.50–15.52. Section 15.50(a) states the core test, combining an *ancillary agreement* requirement with a reasonableness requirement.
+
+"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."[^bc-1550a-test]
+
+Both halves of that sentence carry weight. A covenant that is reasonable in its limits still fails if it is not tied to an otherwise enforceable agreement, and a covenant that is properly ancillary still fails to the extent its limits are unreasonable. The sections that follow walk through how Texas courts apply each requirement.
+
+## What framework governs Texas non-competes, and does it displace the common law? {#governing-framework}
+
+**Short answer.** The Covenants Not to Compete Act governs, and it is exclusive. The criteria in §§ 15.50 and 15.501 and the procedures and remedies in § 15.51 preempt other law, including the common law, so a Texas non-compete dispute is decided under the statute rather than under judge-made rules [^bc-1552-preempt].
+
+Texas once analyzed non-competes under common-law reasonableness doctrine. The Act replaced that body of law with a statutory test and made the replacement explicit in § 15.52.
+
+"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."[^bc-1552-preempt]
+
+The preemption clause is more than housekeeping. It is the reason a Texas court will not graft a common-law gloss onto the statutory test, and it sits at the center of the unsettled attorney's-fee question discussed below. When you analyze a Texas covenant, start and end with the statute and the cases construing it.
+
+## What consideration must support a Texas non-compete? {#consideration}
+
+**Short answer.** Consideration that is reasonably related to a business interest the Act protects. Since *Marsh USA Inc. v. Cook*, the consideration supporting the covenant need only be reasonably related to an interest worthy of protection, such as goodwill, and it need not itself give rise to the employer's interest [^marsh-reasonably-related]. The older, stricter framing in *Light v. Centel* has been relaxed [^light-ancillary].
+
+The consideration question has a long doctrinal history in Texas. In *Light v. Centel Cellular Co. of Texas*, the Texas Supreme Court read the ancillary requirement strictly and held that the covenant before it was not tied to the parties' otherwise enforceable agreement [^light-ancillary].
+
+"Although Light and United did have an otherwise enforceable agreement between them, the covenant was not ancillary to or a part of that otherwise enforceable agreement."[^light-ancillary]
+
+The court relaxed that approach in *Marsh USA Inc. v. Cook*, holding that consideration in the form of stock options was reasonably related to the company's interest in protecting its goodwill, which the Act recognizes as worthy of protection [^marsh-reasonably-related].
+
+"We hold that, under the terms of the Covenants Not to Compete Act (Act), the consideration for the noncompete agreement (stock options) is reasonably related to the company's interest in protecting its goodwill, a business interest the Act recognizes as worthy of protection."[^marsh-reasonably-related]
+
+The practical upshot from these cases is that consideration tied to a protectable interest, such as stock options connected to goodwill or promised confidential information that is actually provided, can support a Texas covenant. What is risky is relying on nothing more than continued at-will employment, because a promise the employer can revoke at any moment raises the illusory-promise problem the next question addresses.
+
+## When does an at-will employee's non-compete become enforceable? {#at-will-enforceability}
+
+**Short answer.** When the employer performs its side of the bargain. An at-will covenant that looks illusory at signing becomes enforceable once the employer actually delivers the promised consideration, such as confidential information [^sheshunoff-performance]. And where the job by its nature requires confidential information, the employer's promise to provide it can be implied [^mann-frankfort-implied].
+
+The illusory-promise problem arises because an at-will employer can fire the employee at any moment, so a promise tied to continued employment may appear unenforceable when made. In *Alex Sheshunoff Management Services, L.P. v. Johnson*, the Texas Supreme Court resolved this by focusing on performance rather than the moment of signing [^sheshunoff-performance].
+
+"The fact that the employer was not bound to perform because he could have fired the employee is irrelevant; if he has performed, he has accepted the employee's offer and created a binding unilateral contract."[^sheshunoff-performance]
+
+The court went further in *Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding*, holding that when the nature of the work necessarily requires the employer to supply confidential information, a promise to provide it can be implied even if the contract does not spell it out [^mann-frankfort-implied].
+
+"When the nature of the work the employee is hired to perform requires confidential information to be provided for the work to be performed by the employee, the employer impliedly promises confidential information will be provided."[^mann-frankfort-implied]
+
+For drafting, the lesson is to make the consideration concrete and to actually deliver it. An agreement that expressly promises access to confidential information, training, or equity, and that the employer honors, stands on far firmer ground than one resting on continued employment alone.
+
+## What time, geography, and scope limits are reasonable in Texas? {#reasonable-scope}
+
+**Short answer.** Limits tailored to the employer's actual protectable interest, no broader than necessary. The Act requires reasonable limits on time, geographic area, and scope of activity, and a restraint greater than needed to protect goodwill or another business interest is unreasonable [^q5-bc-1550a-scope]. There are no fixed numeric ceilings outside the health-care provisions; reasonableness is fact-specific.
+
+Texas does not publish bright-line maximums for ordinary covenants. Instead, § 15.50(a) ties every limit back to the employer's protectable interest, and § 15.51 lets a court cut anything that exceeds it [^q5-bc-1550a-scope].
+
+"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."[^q5-bc-1550a-scope]
+
+Texas publishes no numeric ceiling for ordinary covenants, so reasonableness is assessed case by case against the employer's actual protectable interest. As a practical matter, a restraint keyed to where the employee actually worked or where the employer competes, and a scope tied to the specific customers the employee served or the specific line of business, is easier to defend than a blanket bar on working anywhere in the industry, because the Act requires the restraint to be no greater than necessary [^q5-bc-1550a-scope]. Texas courts generally analyze customer non-solicitation clauses under the same Act and the same reasonableness test rather than a separate, looser standard [^q5-bc-1550a-scope].
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Do not assume a covenant that bars an employee from an entire industry across a wide region will be enforced. The Act requires the restraint to be no greater than necessary to protect a specific business interest, and an overbroad covenant is exposed to reformation down to the minimum a court finds reasonable [^q5-bc-1550a-scope].
+
+## Will a Texas court reform an overbroad non-compete instead of voiding it? {#reformation}
+
+**Short answer.** Yes, reformation is mandatory. If a covenant is ancillary to an otherwise enforceable agreement but its limits are unreasonable, the court shall reform it to the minimum reasonable restraint and enforce it as reformed [^bc-1551c-reform]. A federal court applying Texas law has said reformation should be considered even at the preliminary-injunction stage [^calhoun-pi-reform].
+
+Texas is a true reformation state, and the statute uses mandatory language. Under § 15.51(c), a court faced with an overbroad-but-ancillary covenant does not simply void it; it rewrites the limits and enforces the narrowed version [^bc-1551c-reform].
+
+"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."[^bc-1551c-reform]
+
+On timing, in a Fifth Circuit opinion that was later withdrawn as moot after the parties settled, *Calhoun v. Jack Doheny Cos.* indicated that a district court should consider reformation as part of deciding a preliminary-injunction motion, rather than deferring it to a later stage [^calhoun-pi-reform]. Because the opinion was withdrawn, treat it as persuasive context rather than binding precedent.
+
+"As we shall show, it should have considered reformation of the agreement in the process of deciding the preliminary injunction motion."[^calhoun-pi-reform]
+
+Because reformation is the default, the strategic calculus in Texas differs from no-reformation states. An overbroad Texas covenant is usually not a total loss for the employer; it is more often trimmed. But, as the next question explains, overbreadth carries its own price in the remedies the employer can recover.
+
+> [!NOTE]
+> **Practice note.**
+>
+> Do not treat reformation as a free safety net for an intentionally overbroad covenant. Section 15.51(c) bars damages for any breach occurring before reformation and limits the employer to injunctive relief, and the same subsection separately lets an employer that knowingly over-enforced an overbroad covenant be charged with the employee's defense fees, as the attorney's-fee question explains [^bc-1551c-reform][^calhoun-pi-reform].
+
+## What remedies apply, and who bears the burden of proof? {#remedies-burden}
+
+**Short answer.** Damages and injunctive relief, but with limits, and the burden depends on the contract's purpose. A court may award the employer damages, injunctive relief, or both [^bc-1551a-remedies], yet no damages are available for a breach before an overbroad covenant is reformed [^q7-bc-1551c-damages]. In a personal-services contract, the employer bears the burden of proving the covenant meets the § 15.50 criteria [^bc-1551b-burden].
+
+Section 15.51 sets both the menu of remedies and the allocation of proof. The statute authorizes damages, injunctive relief, or both for breach of an enforceable covenant [^bc-1551a-remedies]. The most consequential limit is the pre-reformation damages bar: if a covenant has to be reformed because it was overbroad, the employer cannot recover damages for breaches that happened before the reformation and is confined to injunctive relief [^q7-bc-1551c-damages].
+
+The burden of proof then turns on what the agreement is mainly for. Under § 15.51(b), if the agreement's primary purpose is to obligate the worker to render personal services, the employer must prove the covenant satisfies § 15.50 [^bc-1551b-burden].
+
+"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."[^bc-1551b-burden]
+
+That allocation matters because most employee covenants are ancillary to personal-services agreements, so the employer carries the burden. Where the agreement has a different primary purpose, such as a sale of a business, § 15.51(b) flips the burden: the promisor must establish that the covenant does not meet the statutory criteria [^bc-1551b-burden-flip].
+
+## Can a party recover attorney's fees in a Texas non-compete dispute? {#attorneys-fees}
+
+**Short answer.** Partly, and only one way. The Act has no general prevailing-party fee rule, but § 15.51(c) lets a court award the employee defense costs and attorney's fees where the employer knew the covenant was overbroad and tried to over-enforce it [^bc-1551c-fee-shift]. Whether the general contract-fee statute can supply fees for enforcing a covenant despite § 15.52's exclusivity is unresolved on the authorities here [^q8-bc-1552-preempt], and a parallel trade-secret claim has its own fee path [^tutsa-fees].
+
+The Act itself contains one express, one-directional fee rule. Under § 15.51(c), in a personal-services covenant case, if the employee proves the employer knew at signing that the covenant's limits were unreasonable and nonetheless sought to enforce it beyond what was necessary, the court may award the employee its defense costs and reasonable attorney's fees [^bc-1551c-fee-shift].
+
+"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."[^bc-1551c-fee-shift]
+
+What the Act does not supply is a general prevailing-party fee award for the employer that wins enforcement. Because § 15.52 makes the Act's remedies exclusive [^q8-bc-1552-preempt], whether the general breach-of-contract fee statute, Tex. Civ. Prac. & Rem. Code ch. 38, can fill that gap is contested and not resolved by the authorities collected here, so an employer should not count on recovering its fees.
+
+"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."[^q8-bc-1552-preempt]
+
+Employers often pair a non-compete claim with a trade-secret claim precisely because the Texas Uniform Trade Secrets Act has its own fee-shifting rule. Under § 134A.005, a court may award reasonable attorney's fees to the prevailing party in defined circumstances, including willful and malicious misappropriation [^tutsa-fees].
+
+"The court may award reasonable attorney's fees to the prevailing party if: (1) a claim of misappropriation is made in bad faith; (2) a motion to terminate an injunction is made or resisted in bad faith; or (3) willful and malicious misappropriation exists."[^tutsa-fees]
+
+> [!NOTE]
+> **Practice note.**
+>
+> Do not promise an employer client that it will recover its attorney's fees by winning enforcement of a Texas non-compete. The Act's only express fee rule under § 15.51(c) runs to the employee, and whether chapter 38 supplies fees for enforcement despite § 15.52's exclusivity is unresolved, so employer fee recovery should be treated as uncertain and, where possible, anchored to a separate claim such as trade-secret misappropriation [^bc-1551c-fee-shift][^q8-bc-1552-preempt][^tutsa-fees].
+
+## What special rules apply to Texas physician non-competes? {#physician-noncompetes}
+
+**Short answer.** Several statutory conditions, plus a 2025 good-cause rule. A physician covenant is enforceable only if it meets § 15.50(b)'s conditions, including a buyout capped at the physician's total annual salary and wages [^bc-1550b-buyout]. As amended by SB 1318, a physician covenant is void if the physician is involuntarily discharged without good cause [^bc-1550d-goodcause].
+
+Texas has regulated physician non-competes for decades through § 15.50(b), which layers specific requirements on top of the general test, including patient-list access, medical-record access, continuity-of-care protection, and a buyout option. The buyout cap is a defining feature: the covenant must let the physician buy out of the restraint for no more than the physician's total annual salary and wages at the time of termination [^bc-1550b-buyout].
+
+Senate Bill 1318, effective September 1, 2025, tightened these rules. Among other changes, it added a good-cause condition: a physician non-compete is void and unenforceable if the physician is involuntarily discharged without good cause [^bc-1550d-goodcause].
+
+"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."[^bc-1550d-goodcause]
+
+The statute supplies its own definition. Good cause means a reasonable basis for discharge that is directly related to the physician's conduct, job performance, or employment record, so a discharge for genuine performance or conduct problems can leave the covenant intact, while a no-fault termination cannot [^bc-1550d-goodcause].
+
+Section 15.50(b) also caps a physician covenant at a one-year duration and a five-mile radius from the physician's primary practice location and requires the terms to be clearly and conspicuously stated in writing [^bc-1550b4-limits]. Those are statutory ceilings for the covered physician covenant, not a safe harbor that makes any covenant within them automatically reasonable in other contexts. A separate carve-out protects ownership: the physician requirements do not apply to a physician's business ownership interest in a licensed hospital or licensed ambulatory surgical center [^bc-1550c-ownership]. And for integrated-care structures, the statute provides that practicing medicine, for these purposes, does not include managing or directing medical services in an administrative capacity [^bc-1550b1-admin], which preserves room for certain management arrangements.
+
+"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."[^bc-1550b1-admin]
+
+> [!NOTE]
+> **Practice note.**
+>
+> Do not reuse a general Texas non-compete for a physician. Section 15.50(b) requires patient-list and record access, continuity-of-care terms, and a salary-capped buyout, and since September 1, 2025 the covenant is void if the physician is fired without good cause [^bc-1550b-buyout][^bc-1550d-goodcause].
+
+## What does SB 1318 require for dentists, nurses, and physician assistants? {#health-care-practitioners}
+
+**Short answer.** A new statutory cap, effective September 1, 2025. Section 15.501, added by SB 1318, makes a non-compete unenforceable against a dentist, professional or vocational nurse, or physician assistant unless it provides a salary-capped buyout, expires within one year, is limited to a five-mile radius, and is clearly and conspicuously in writing [^bc-15501-hcp].
+
+Before 2025, the statutory buyout-and-limits regime applied chiefly to physicians. SB 1318 extended a parallel set of limits to a broader group of health-care practitioners by enacting § 15.501, effective September 1, 2025 [^bc-15501-hcp]. The section defines that group precisely as licensed dentists, professional or vocational nurses, and physician assistants [^bc-15501a-def].
+
+"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."[^bc-15501-hcp]
+
+These four requirements mirror the physician buyout, one-year, and five-mile structure, so an employer that already complies with the physician rules has a template for the broader group. Because § 15.501 is new, added by SB 1318 effective September 1, 2025, there is little appellate gloss yet on terms like *primarily practiced*, and practitioners and employers should expect open questions until courts interpret it.
+
+> [!NOTE]
+> **Practice note.**
+>
+> Do not apply an unlimited or out-of-state non-compete to a Texas dentist, nurse, or physician assistant on or after September 1, 2025. Section 15.501 makes such a covenant unenforceable unless it includes a salary-capped buyout, a one-year expiry, a five-mile limit, and clear, conspicuous written terms [^bc-15501-hcp].
+
+## Can a choice-of-law or forum-selection clause change the outcome in Texas? {#choice-of-law-forum}
+
+**Short answer.** Sometimes for forum, rarely to escape Texas policy. Texas courts will enforce a mandatory forum-selection clause through mandamus [^autonation-forum]. But Texas treats enforcement of non-competes as a matter of fundamental policy, and in *DeSantis v. Wackenhut* the court applied Texas law, not the contractually chosen law, and found the covenant unenforceable [^desantis-texas-law].
+
+Multistate employers often try to select a more favorable state's law or a particular forum. The two devices fare differently in Texas. A forum-selection clause is generally enforceable; in *In re AutoNation, Inc.*, the Texas Supreme Court used mandamus to enforce a mandatory forum-selection clause in a non-compete dispute [^autonation-forum].
+
+"AutoNation now seeks mandamus relief to enforce the mandatory forum-selection clause, and we conditionally grant it."[^autonation-forum]
+
+A choice-of-law clause is harder to use as an end-run around Texas policy. In *DeSantis v. Wackenhut Corp.*, the Texas Supreme Court refused to apply the contract's chosen law where doing so would offend Texas's fundamental policy on covenants not to compete [^desantis-texas-law].
+
+"We hold that Texas law, not Florida law, applies in this case, and that under Texas law, the noncompetition agreement is unenforceable."[^desantis-texas-law]
+
+The federal courts apply the same conflicts analysis. In *Cardoni v. Prosperity Bank*, the Fifth Circuit walked through the Texas-versus-other-state policy comparison, noting that Texas generally permits covenants that are reasonably limited in time and geography [^cardoni-conflicts]. The combined lesson is that forum clauses tend to hold, while a choice-of-law clause selecting a more employer-friendly state may yield to Texas policy when a Texas worker and Texas interests are involved, and conversely Texas policy may yield where another state's fundamental policy controls.
+
+## Does a tolling clause extend a Texas non-compete during breach or litigation? {#tolling-during-breach}
+
+**Short answer.** Texas law does not clearly bless contractual tolling. No Texas statute or Texas Supreme Court decision squarely authorizes extending a non-compete's clock for the time an employee spent breaching or litigating, and any such extension still has to satisfy the Act's reasonableness limit [^q12-bc-1550a-reasonable]. The more dependable protection against ongoing violations is injunctive relief, which the Act expressly authorizes [^q12-bc-1551a-injunction].
+
+Many national templates add a tolling clause so the employer gets the full benefit of the restricted period even if the former employee competes during it. Texas has no statute on point, and the question is best treated as unsettled. Whatever a tolling clause says, the resulting restraint must still be reasonable under § 15.50(a); a clause that effectively extends the restriction for an indefinite period of breach or litigation is in tension with the requirement that the limit on time be reasonable and no greater than necessary [^q12-bc-1550a-reasonable].
+
+"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."[^q12-bc-1550a-reasonable]
+
+In practice, rather than relying on a contractual tolling provision, a Texas employer can seek injunctive relief, which the Act authorizes for breach of an enforceable covenant [^q12-bc-1551a-injunction]; an injunction running from the date of the order can effectively extend protection past the covenant's nominal end date when violations are ongoing. There is no Texas Supreme Court decision squarely approving or rejecting a contractual tolling clause, so this conclusion rests on the statutory reasonableness requirement and the availability of injunctive relief rather than a case directly on tolling.
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Do not assume a Texas court will add back time to a non-compete for a period of breach or litigation based on a tolling clause. Texas law is unsettled on contractual tolling, and any extended restraint still must satisfy § 15.50(a)'s reasonableness limit, so the more reliable path is to seek injunctive relief for ongoing violations [^q12-bc-1550a-reasonable].
+
+## Are trade-secret and confidentiality protections available in Texas? {#trade-secrets}
+
+**Short answer.** Yes. The Texas Uniform Trade Secrets Act lets a court enjoin actual or threatened misappropriation, independent of any covenant [^tutsa-injunction]. A confidentiality agreement is also available, but it cannot be drafted so broadly that it functions as a disguised non-compete and triggers the Act's reasonableness test [^q13-bc-1550a-disguised].
+
+Because covenant enforcement carries the reformation and damages limits discussed above, Texas employers frequently lean on trade-secret and confidentiality protections as a complement. The Texas Uniform Trade Secrets Act provides injunctive relief that does not depend on any non-compete [^tutsa-injunction].
+
+"Actual or threatened misappropriation may be enjoined if the order does not prohibit a person from using general knowledge, skill, and experience that person acquired during employment."[^tutsa-injunction]
+
+That statutory carve-out for *general knowledge, skill, and experience* is important: a trade-secret injunction protects genuine secrets, not the ordinary expertise an employee carries to a new job [^tutsa-injunction]. Beyond an injunction, the Act also lets a claimant recover damages for misappropriation [^tutsa-damages]. A non-disclosure agreement complements these protections by contract, and the Act leaves contractual remedies in place whether or not they rest on trade-secret misappropriation [^tutsa-contract-remedies]. But an NDA is not a way around § 15.50: a confidentiality clause drafted so broadly that it effectively bars the former employee from working in the field invites a court to treat it as a non-compete and apply the Act's reasonableness test [^q13-bc-1550a-disguised].
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Do not draft a Texas confidentiality or non-disclosure clause so broadly that it operates as a covert non-compete. The trade-secret statute supports an injunction against misappropriation but excludes general knowledge, skill, and experience, and an NDA that effectively prevents the employee from working can be recharacterized as a non-compete subject to § 15.50 [^tutsa-injunction][^q13-bc-1550a-disguised].
+
+[^about]: By Steven Obiajulu, J.D. Published by [openagreements.org](https://openagreements.org) · Maintained by [UseJunior](https://usejunior.com). Last reviewed 2026-06-03. License: CC BY 4.0. Steven Obiajulu, J.D. is admitted in New York, not Texas. This article synthesizes Texas primary law and is not legal advice from a Texas-admitted attorney. This article is for informational purposes only and does not create an attorney-client relationship.
+
+[^bc-1550a-test]: **Tex. Bus. & Com. Code § 15.50** — "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." *Tex. Bus. & Com. Code § 15.50(a).* <https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm>
+
+[^bc-1552-preempt]: **Tex. Bus. & Com. Code § 15.52** — "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." *Tex. Bus. & Com. Code § 15.52.* <https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm>
+
+[^marsh-reasonably-related]: **Marsh USA Inc. v. Cook** — "We hold that, under the terms of the Covenants Not to Compete Act (Act), the consideration for the noncompete agreement (stock options) is reasonably related to the company's interest in protecting its goodwill, a business interest the Act recognizes as worthy of protection." *Marsh USA Inc. v. Cook, 354 S.W.3d 764 (Tex. 2011).* <https://www.courtlistener.com/opinion/2541088/marsh-usa-inc-v-cook/#:~:text=We%20hold%20that%2C%20under%20the,recognizes%20as%20worthy%20of%20protection.>
+
+[^light-ancillary]: **Light v. Centel Cellular Co. of Texas** — "Although Light and United did have an otherwise enforceable agreement between them, the covenant was not ancillary to or a part of that otherwise enforceable agreement." *Light v. Centel Cellular Co. of Tex., 883 S.W.2d 642 (Tex. 1994).* <https://www.courtlistener.com/opinion/1525150/light-v-centel-cellular-co-of-texas/#:~:text=Although%20Light%20and%20United%20did,of%20that%20otherwise%20enforceable%20agreement.>
+
+[^sheshunoff-performance]: **Alex Sheshunoff Management Services, L.P. v. Johnson** — "The fact that the employer was not bound to perform because he could have fired the employee is irrelevant; if he has performed, he has accepted the employee's offer and created a binding unilateral contract." *Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644 (Tex. 2006).* <https://www.courtlistener.com/opinion/894789/alex-sheshunoff-management-services-lp-v-johnson/#:~:text=The%20fact%20that%20the%20employer,created%20a%20binding%20unilateral%20contract.>
+
+[^mann-frankfort-implied]: **Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding** — "When the nature of the work the employee is hired to perform requires confidential information to be provided for the work to be performed by the employee, the employer impliedly promises confidential information will be provided." *Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844 (Tex. 2009).* <https://www.courtlistener.com/opinion/895104/mann-frankfort-stein-lipp-advisors-inc-v-fielding/#:~:text=When%20the%20nature%20of%20the,confidential%20information%20will%20be%20provided.>
+
+[^q5-bc-1550a-scope]: **Tex. Bus. & Com. Code § 15.50** — "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." *Tex. Bus. & Com. Code § 15.50(a).* <https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm>
+
+[^bc-1551c-reform]: **Tex. Bus. & Com. Code § 15.51** — "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." *Tex. Bus. & Com. Code § 15.51(c).* <https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm>
+
+[^calhoun-pi-reform]: **Calhoun v. Jack Doheny Companies, Inc.** — "As we shall show, it should have considered reformation of the agreement in the process of deciding the preliminary injunction motion." *Calhoun v. Jack Doheny Cos., 969 F.3d 232 (5th Cir. 2020) (later withdrawn as moot).* <https://www.courtlistener.com/opinion/4773823/donald-calhoun-v-jack-doheny-companies-inc/#:~:text=As%20we%20shall%20show%2C%20it,deciding%20the%20preliminary%20injunction%20motion.>
+
+[^bc-1551a-remedies]: **Tex. Bus. & Com. Code § 15.51** — "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." *Tex. Bus. & Com. Code § 15.51(a).* <https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm>
+
+[^q7-bc-1551c-damages]: **Tex. Bus. & Com. Code § 15.51** — "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." *Tex. Bus. & Com. Code § 15.51(c).* <https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm>
+
+[^bc-1551b-burden]: **Tex. Bus. & Com. Code § 15.51** — "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." *Tex. Bus. & Com. Code § 15.51(b).* <https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm>
+
+[^bc-1551b-burden-flip]: **Tex. Bus. & Com. Code § 15.51** — "If the agreement has a different primary purpose, the promisor has the burden of establishing that the covenant does not meet those criteria." *Tex. Bus. & Com. Code § 15.51(b).* <https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm>
+
+[^bc-1551c-fee-shift]: **Tex. Bus. & Com. Code § 15.51** — "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." *Tex. Bus. & Com. Code § 15.51(c).* <https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm>
+
+[^q8-bc-1552-preempt]: **Tex. Bus. & Com. Code § 15.52** — "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." *Tex. Bus. & Com. Code § 15.52.* <https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm>
+
+[^tutsa-fees]: **Tex. Civ. Prac. & Rem. Code § 134A.005** — "The court may award reasonable attorney's fees to the prevailing party if: (1) a claim of misappropriation is made in bad faith; (2) a motion to terminate an injunction is made or resisted in bad faith; or (3) willful and malicious misappropriation exists." *Tex. Civ. Prac. & Rem. Code § 134A.005.* <https://statutes.capitol.texas.gov/Docs/CP/htm/CP.134A.htm>
+
+[^bc-1550b-buyout]: **Tex. Bus. & Com. Code § 15.50** — "the covenant must provide for a buyout of the covenant by the physician in an amount that is not greater than the physician's total annual salary and wages at the time of termination of the contract or employment;" *Tex. Bus. & Com. Code § 15.50(b)(2).* <https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm>
+
+[^bc-1550d-goodcause]: **Tex. Bus. & Com. Code § 15.50** — "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." *Tex. Bus. & Com. Code § 15.50(d).* <https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm>
+
+[^bc-1550b4-limits]: **Tex. Bus. & Com. Code § 15.50** — "(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." *Tex. Bus. & Com. Code § 15.50(b)(4).* <https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm>
+
+[^bc-1550c-ownership]: **Tex. Bus. & Com. Code § 15.50** — "Subsection (b) does not apply to a physician's business ownership interest in a licensed hospital or licensed ambulatory surgical center." *Tex. Bus. & Com. Code § 15.50(c).* <https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm>
+
+[^bc-1550b1-admin]: **Tex. Bus. & Com. Code § 15.50** — "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." *Tex. Bus. & Com. Code § 15.50(b-1).* <https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm>
+
+[^bc-15501-hcp]: **Tex. Bus. & Com. Code § 15.501** — "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." *Tex. Bus. & Com. Code § 15.501(b).* <https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm>
+
+[^bc-15501a-def]: **Tex. Bus. & Com. Code § 15.501** — "(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." *Tex. Bus. & Com. Code § 15.501(a).* <https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm>
+
+[^autonation-forum]: **In re AutoNation, Inc.** — "AutoNation now seeks mandamus relief to enforce the mandatory forum-selection clause, and we conditionally grant it." *In re AutoNation, Inc., 228 S.W.3d 663 (Tex. 2007).* <https://www.courtlistener.com/opinion/894883/in-re-autonation-inc/#:~:text=AutoNation%20now%20seeks%20mandamus%20relief,and%20we%20conditionally%20grant%20it.>
+
+[^desantis-texas-law]: **DeSantis v. Wackenhut Corp.** — "We hold that Texas law, not Florida law, applies in this case, and that under Texas law, the noncompetition agreement is unenforceable." *DeSantis v. Wackenhut Corp., 793 S.W.2d 670 (Tex. 1990).* <https://www.courtlistener.com/opinion/2376061/desantis-v-wackenhut-corp/#:~:text=We%20hold%20that%20Texas%20law%2C,the%20noncompetition%20agreement%20is%20unenforceable.>
+
+[^cardoni-conflicts]: **Cardoni v. Prosperity Bank** — "Texas generally allows them so long as they are limited both geographically and temporally." *Cardoni v. Prosperity Bank, 805 F.3d 573 (5th Cir. 2015).* <https://www.courtlistener.com/opinion/3150844/chris-cardoni-v-prosperity-bank/#:~:text=Texas%20generally%20allows%20them%20so,limited%20both%20geographically%20and%20temporally.>
+
+[^q12-bc-1550a-reasonable]: **Tex. Bus. & Com. Code § 15.50** — "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." *Tex. Bus. & Com. Code § 15.50(a).* <https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm>
+
+[^q12-bc-1551a-injunction]: **Tex. Bus. & Com. Code § 15.51** — "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." *Tex. Bus. & Com. Code § 15.51(a).* <https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm>
+
+[^tutsa-injunction]: **Tex. Civ. Prac. & Rem. Code § 134A.003** — "Actual or threatened misappropriation may be enjoined if the order does not prohibit a person from using general knowledge, skill, and experience that person acquired during employment." *Tex. Civ. Prac. & Rem. Code § 134A.003.* <https://statutes.capitol.texas.gov/Docs/CP/htm/CP.134A.htm>
+
+[^q13-bc-1550a-disguised]: **Tex. Bus. & Com. Code § 15.50** — "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." *Tex. Bus. & Com. Code § 15.50(a).* <https://statutes.capitol.texas.gov/Docs/BC/htm/BC.15.htm>
+
+[^tutsa-damages]: **Tex. Civ. Prac. & Rem. Code § 134A.004** — "In addition to or in lieu of injunctive relief, a claimant is entitled to recover damages for misappropriation." *Tex. Civ. Prac. & Rem. Code § 134A.004(a).* <https://statutes.capitol.texas.gov/Docs/CP/htm/CP.134A.htm>
+
+[^tutsa-contract-remedies]: **Tex. Civ. Prac. & Rem. Code § 134A.007** — "This chapter does not affect: (1) contractual remedies, whether or not based upon misappropriation of a trade secret" *Tex. Civ. Prac. & Rem. Code § 134A.007(b).* <https://statutes.capitol.texas.gov/Docs/CP/htm/CP.134A.htm>

package/skills/non-compete-contract-explainer/content/us-virgin-islands.md

@@ -0,0 +1,193 @@
+---
+jurisdiction: "U.S. Virgin Islands"
+slug: us-virgin-islands
+countryCode: US
+snapshotAsOf: "2026-06-08"
+lastReviewed: "2026-06-03"
+canonicalUrl: https://openagreements.org/legal/non-compete/us-virgin-islands
+license: CC BY 4.0
+stale: false
+---
+
+> [!IMPORTANT]
+> **Informational only — not legal advice.** This is a snapshot of an OpenAgreements practice note,
+> provided for general information. It is not legal advice, does not create an attorney-client
+> relationship, and is not a substitute for a licensed attorney in the relevant jurisdiction.
+> Laws change; verify against the canonical version before relying on it.
+>
+> **Canonical:** https://openagreements.org/legal/non-compete/us-virgin-islands · **Snapshot as of:** 2026-06-08 · License: CC BY 4.0 · © UseJunior
+
+# Non-Competes in the U.S. Virgin Islands[^about]
+
+The U.S. Virgin Islands may enforce a reasonable non-compete but has no statute on point; the Superior Court in Arvidson v. Buchar judges covenants under an indigenous common-law reasonableness test selected through the Banks methodology, and a small-island economy plus a no-at-will Wrongful Discharge Act make aggressive restraints hard to enforce.
+
+
+## At a glance
+
+| Question | U.S. Virgin Islands |
+| --- | --- |
+| **Are non-competes enforceable?** | Allowed if reasonable |
+| **Bottom line** | The U.S. Virgin Islands enforces a non-compete only if it is reasonable in duration, area, and scope under a single trial-court decision, and aggressive restraints are hard to enforce in a small-island, non-at-will economy. |
+| **Main law or case** | Arvidson v. Buchar, 2019 VI SUPER 122 (Super. Ct. V.I. 2019) (common law via 1 V.I.C. § 4) |
+| **Can a court narrow it?** | Yes — rewrites to reasonable |
+| **Applies to contractors?** | Unclear |
+| **Restriction extended during a breach?** | Silent — no statute or case addresses tolling |
+| **Maximum length set by law** | No statutory limit |
+
+## Are employee non-compete agreements enforceable in the U.S. Virgin Islands? {#employee-noncompetes}
+
+**Short answer.** Sometimes. The Virgin Islands is a *reasonableness* jurisdiction, not a per se ban like California or North Dakota. A covenant can be enforced if it is ancillary to a valid relationship, supported by consideration, and no broader than necessary to protect a legitimate business interest. But there is no non-compete statute, the leading authority is a single trial-court decision with no V.I. Supreme Court ruling behind it, and that decision struck the covenant in front of it down — so enforcement is real but fact-dependent and far from automatic [^arvidson-enforceable].
+
+The Virgin Islands is an unincorporated U.S. territory. An employment-covenant dispute is decided in the first instance by the Superior Court of the Virgin Islands applying territorial law, with appeals to the Supreme Court of the Virgin Islands (established 2007) and a parallel federal track in the District Court of the Virgin Islands under the Third Circuit. There is no code section that governs employee non-competes; enforceability is a matter of territorial common law, which the courts build through the methodology described below.
+
+Because the law lives in case decisions rather than a statute, most of the operating rules here are anchored to one opinion — *Arvidson v. Buchar* — and to the reception statute that tells Virgin Islands courts where to find their common law [^vic-1-4]. A covenant that would survive comfortably in a blue-pencil state still carries genuine first-impression risk in the territory.
+
+## What test does the Superior Court apply to a Virgin Islands non-compete? {#governing-test}
+
+**Short answer.** The Superior Court applies a common-law rule of reasonableness. Under *Arvidson*, a partial restraint of trade is valid only when it is ancillary to a valid contract or transaction, supported by valid consideration, protects a legitimate business interest, and is reasonable in its duration, geographic area, and the scope of activity it restricts [^arvidson-rule]. Reasonableness is then measured against five factors the court drew from earlier Virgin Islands case law [^arvidson-factors].
+
+The court frames the inquiry as a balance among the employer's legitimate business interest, the hardship the restraint imposes on the employee, and the public interest — assessed through the covenant's *time, place, and manner*. The five factors restate that balance as concrete questions:
+
+"This test of reasonableness must be applied to the following five factors 1 Is the duration of the restriction reasonable? 2 Is the area of restriction reasonable? 3 Is the interest of the employer reasonably protected? 4 Is undue hardship imposed on the employee? 5 Is the public interest reasonably protected?"[^arvidson-factors]
+
+The ultimate determination of reasonableness is a question of law, but it is a fact-intensive one: the court weighs the totality of the circumstances rather than applying a fixed formula [^arvidson-factintensive]. For in-house counsel that means a covenant is judged on its specific facts, and a clause that omits any durational, territorial, or activity limit will not survive.
+
+## If there is no statute, where does the non-compete rule come from? {#common-law-source}
+
+**Short answer.** From the territory's common law, which the courts now build deliberately rather than by copying the Restatements. Historically, 1 V.I.C. § 4 directed Virgin Islands courts to apply the Restatements as their rules of decision [^banks-section4]. In *Banks v. International Rental & Leasing Corp.*, the Supreme Court of the Virgin Islands held that the Legislature did not intend that statute to force mechanical application of the latest Restatement [^banks-method], and in *Connor* it set out the three-factor analysis Virgin Islands courts use to choose a rule [^connor-factors].
+
+This matters for non-competes because *Arvidson* did not simply lift Restatement (Second) of Contracts § 188 off the shelf. It ran the *Banks* analysis and chose an indigenous reasonableness rule, which is why the Virgin Islands standard is a common-law balance rather than a verbatim Restatement test.
+
+"We conclude that the Legislature did not intend for section 4 of title 1 to compel this Court to mechanically apply the most recent Restatement."[^banks-method]
+
+Under *Connor*, when the law is unsettled the court does not default to the majority rule automatically; it asks which approach is soundest for the territory:
+
+"Rather, this Court has instructed that, instead of mechanistically following the Restatements, courts should consider ‘three non-dispositive factors’ to determine Virgin Islands common law: ‘(1) whether any Virgin Islands courts have previously adopted a particular rule; (2) the position taken by a majority of courts from other jurisdictions; and (3) most importantly, which approach represents the soundest rule for the Virgin Islands.’"[^connor-factors]
+
+The practical takeaway: a covenant should be defended on Virgin Islands terms. Citing only mainland precedent or the Restatement as if it controlled invites a *Banks* challenge that the rule was never properly adopted here.
+
+## How do courts judge a covenant's duration, geographic area, and scope? {#duration-geography-scope}
+
+**Short answer.** By asking whether each dimension is no broader than necessary to protect a legitimate interest. *Arvidson* struck its covenant precisely because it gave no durational, territorial, or activity limit and never identified the interest it was meant to protect [^arvidson-scope]. The older decision in *V.I. Diving Schools v. Dixon* voided a covenant on the same ground — that it was an unreasonable restraint greater than necessary to protect the employer's business interest [^dixon-void].
+
+Geography deserves special attention. The territory is three small islands — St. Thomas, St. Croix, and St. John — so a territory-wide or *worldwide* restraint is hard to justify as the narrowest protection of a genuine interest. The same logic that makes a 50-mile radius unremarkable on the mainland can make an all-islands restraint look like a naked barrier to earning a living.
+
+"restrictive clauses of the agreement are void and unenforceable as against public policy on the ground that they are unreasonable restraint on competition."[^dixon-void]
+
+A covenant should therefore state an explicit duration, a defined geographic area tied to where the employer actually competes, and a scope limited to the activities that threaten the protected interest. *Dixon* is a 1983 Territorial Court decision predating *Banks*, so treat it as persuasive illustration rather than binding doctrine — but its reasoning tracks the modern *Arvidson* test.
+
+## What consideration supports a Virgin Islands non-compete, and is continued employment enough? {#consideration}
+
+**Short answer.** *Arvidson* makes valid consideration an element of an enforceable covenant, but no Virgin Islands decision squarely holds whether continued employment alone is sufficient for a covenant signed mid-employment [^arvidson-consideration]. The wrinkle is that the territory is not an at-will jurisdiction: the Wrongful Discharge Act lets an employer dismiss an employee for only nine enumerated reasons [^arvidson-wda], so the mainland argument that an employer gives value by merely refraining from firing is weaker here.
+
+> [!NOTE]
+> **Practice note.**
+>
+> Because the Wrongful Discharge Act limits when an employer may fire, a court could view a bare promise of continued employment as adding little new value. The conservative practice is to support a mid-employment covenant with fresh, independent consideration — a bonus, a raise, a promotion, or specialized training — rather than rely on continued employment alone [^q5-arvidson-wda].
+
+No on-point Virgin Islands case resolves the question, so this is a planning judgment rather than a settled rule. Obtaining the covenant at hire — when the offer of employment is itself the consideration — avoids the mid-employment problem, though even a covenant signed at hire must still satisfy *Arvidson*'s ancillary, protectable-interest, and reasonable-scope requirements.
+
+## Will a court narrow an overbroad covenant, or void it entirely? {#overbroad-narrowing}
+
+**Short answer.** *Arvidson* chose *equitable reformation* as the soundest rule for Virgin Islands non-competes, rejecting both the rigid blue-pencil rule and the all-or-nothing approach [^q6-arvidson]. But the court adopted reformation with an express *greater willingness to refuse to reform* agreements that are not reasonable on their face [^q6-arvidson-strict], and it declined to rewrite the covenant in front of it because that clause had no time, place, or scope limit to salvage. An employer therefore cannot assume a court will rescue an overbroad clause.
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Draft to the narrowest defensible scope from the start. Reformation is theoretically available in the Virgin Islands, but *Arvidson* applies it strictly — a court is reluctant to rewrite an agreement that is not reasonable on its face or that would require supplying essential terms [^q6-arvidson-strict]. A clause with no reasonable core to enforce risks losing entirely, as both *Arvidson* and the older *Dixon* decision show [^q6-dixon].
+
+A savings or step-down clause may improve the odds of partial enforcement, but only if enough reasonable terms already exist for a court to enforce without effectively writing a new covenant. The safer assumption is that the covenant as drafted is the covenant the court will judge.
+
+## Does the restricted period toll or extend if the employee breaches? {#tolling}
+
+**Short answer.** No Virgin Islands statute or decision addresses tolling — whether the clock pauses, or the restricted period is extended, while a former employee is violating the covenant or litigation is pending. This is an open question in the territory [^q7-arvidson].
+
+> [!NOTE]
+> **Practice note.**
+>
+> Treat any tolling or extension-on-breach clause as untested in the Virgin Islands. Because the controlling test asks whether the *total* restraint is reasonable in duration [^q7-arvidson], an extension that lengthens the covenant well beyond its stated term could itself be challenged as unreasonable. If you include a tolling clause, cap the maximum extension and keep the underlying period conservative so the worst-case total still looks reasonable.
+
+Because there is no on-point authority, a Virgin Islands court asked to enforce a tolling provision would likely reason from the same reasonableness principles that govern duration generally, and from persuasive mainland authority — but the outcome cannot be predicted with confidence.
+
+## If a non-compete is shaky, what protects trade secrets and confidential information? {#trade-secrets}
+
+**Short answer.** The Virgin Islands has adopted the Uniform Trade Secrets Act, which gives an employer a statutory remedy for misappropriation independent of any covenant [^vic-11-1001]. It defines a trade secret broadly [^vic-11-1002], preserves contractual remedies alongside the Act [^vic-11-1008], and the evidence code adds a privilege to resist disclosing trade secrets in litigation [^vic-5-858].
+
+This matters because trade-secret and confidentiality protection does not depend on the reasonableness test that makes non-competes hard to enforce. The Act both displaces conflicting common-law misappropriation remedies and preserves contractual ones, so a confidentiality agreement and the statutory claim work together [^vic-11-1008]. A narrowly drafted confidentiality and trade-secret program is often the more durable protection in the territory, and *Dixon* shows the risk of relying on a covenant without a documented protectable interest — the employer there failed to prove any trade secret worth protecting [^dixon-notrade].
+
+## Can an overbroad covenant run afoul of the Virgin Islands Antimonopoly Law? {#antimonopoly}
+
+**Short answer.** It may supply an additional, untested ground of attack. The Virgin Islands Antimonopoly Law makes it a violation to unreasonably restrain trade or commerce by *contract, combination, or conspiracy* [^vic-11-1503]. An employee challenging a sweeping covenant — especially in a small market where the restraint could foreclose competition — might invoke that statute alongside the common-law reasonableness defense.
+
+This is a secondary tool rather than the main event, and an untested one: the statute's concerted-action language (*combination or conspiracy with one or more other persons*) fits horizontal market conduct more naturally than a two-party employment covenant, and no Virgin Islands case has applied § 1503 to an employee non-compete. The day-to-day enforceability question is decided under the *Arvidson* reasonableness test. But the statute reinforces why a covenant that goes beyond protecting a legitimate interest is vulnerable, because the same overreach that fails the reasonableness test can also look like an unreasonable restraint of trade.
+
+## How are non-solicits, NDAs, and sale-of-business or LLC covenants treated? {#other-covenants}
+
+**Short answer.** An employee non-solicit that restrains competitive activity should be drafted to satisfy *Arvidson*'s reasonableness principles, because a restraint dressed up as a non-solicit is still a partial restraint of trade [^q10-arvidson]. Confidentiality and trade-secret clauses are supported separately by contract law and the Uniform Trade Secrets Act rather than by the non-compete test — though an overbroad confidentiality clause that operates as a de facto non-compete may draw similar scrutiny. Entity-governance covenants have a clear statutory foothold: the LLC statute expressly contemplates a court-ordered *covenant not to compete* as a term of a member buyout [^vic-13-1702].
+
+Broader sale-of-business covenants should still be analyzed under the same reasonableness principles. Mainland practice often treats a seller or departing owner who is paid for goodwill more favorably than an ordinary employee, because the legitimate interest is stronger and the hardship is offset by the purchase price — but in the Virgin Islands that more-favorable treatment is an inference from common-law context, not a territorial appellate holding. A sale-of-business covenant is still measured for reasonable duration, area, and scope, and a *worldwide* restraint on a Virgin Islands business will draw the same skepticism a worldwide employee covenant would.
+
+## Does the federal FTC non-compete ban apply, and which court decides a dispute? {#ftc-and-courts}
+
+**Short answer.** No. The Federal Trade Commission's 2024 Non-Compete Rule never took effect — a federal court set it aside, the FTC acceded to that result, and the Commission has now removed the rule from the Code of Federal Regulations [^ftc-removal]. Virgin Islands non-compete disputes are governed by territorial common law and decided in the first instance by the Superior Court, with appeals to the Supreme Court of the Virgin Islands and a separate federal track in the District Court of the Virgin Islands.
+
+> [!NOTE]
+> **Practice note.**
+>
+> Do not rely on guidance — including parts of the 2024–2025 commentary — that treats the FTC ban as live. As of February 2026 the rule has been removed from the CFR and is not operative [^ftc-removal]; enforceability turns entirely on Virgin Islands law. Separately, the FTC may still challenge individual covenants case-by-case under its general authority, but there is no across-the-board federal ban.
+
+For planning, the audience that matters is a Virgin Islands judge applying the *Arvidson* reasonableness test — not a federal rule. Where a dispute lands in the District Court on diversity or federal-question grounds, that court still applies Virgin Islands substantive law, informed by Third Circuit procedure.
+
+[^about]: By Steven Obiajulu, J.D. Published by [openagreements.org](https://openagreements.org) · Maintained by [UseJunior](https://usejunior.com). Last reviewed 2026-06-03. License: CC BY 4.0. Steven Obiajulu, J.D. is admitted in New York, not U.S. Virgin Islands. This article synthesizes U.S. Virgin Islands primary law and is not legal advice from a U.S. Virgin Islands-admitted attorney. This article is for informational purposes only and does not create an attorney-client relationship.
+
+[^arvidson-enforceable]: **Arvidson v. Buchar** — "Accordingly, the Arvidsons have met their summary judgment burden, and the Court finds the covenant to not compete invalid and unenforceable as a matter of law" *Arvidson v. Buchar, 2019 VI SUPER 122 (Super. Ct. V.I. Sept. 10, 2019).* <https://usvipublicportal-api.vicourts.org/courts/87edff36-c02b-4073-aea4-c0652bc123d9/cms/case/7432A3F8-AD71-45C5-B028-B4471D746A4E/docketentrydocuments/27b98266-7d9f-405f-b7ba-c221f8db0a97>
+
+[^vic-1-4]: **1 V.I.C. § 4 — Application of common law; restatements** — "shall be the rules of decision in the courts of the Virgin Islands in cases to which they apply, in the absence of local laws to the contrary." *1 V.I.C. § 4.* <https://advance.lexis.com/container?config=014DJAA3OWU1MmYyMC1kNzRhLTQ4NDAtYTMxZS01YzJhMzBkZDA0NDMKAFBvZENhdGFsb2dSOvVciRp0EcGxvMymeAXd>
+
+[^arvidson-rule]: **Arvidson v. Buchar** — "In accordance, this Court similarly adopts the same rule of reasonableness" *Arvidson v. Buchar, 2019 VI SUPER 122 (Super. Ct. V.I. Sept. 10, 2019).* <https://usvipublicportal-api.vicourts.org/courts/87edff36-c02b-4073-aea4-c0652bc123d9/cms/case/7432A3F8-AD71-45C5-B028-B4471D746A4E/docketentrydocuments/27b98266-7d9f-405f-b7ba-c221f8db0a97>
+
+[^arvidson-factors]: **Arvidson v. Buchar** — "This test of reasonableness must be applied to the following five factors 1 Is the duration of the restriction reasonable? 2 Is the area of restriction reasonable? 3 Is the interest of the employer reasonably protected? 4 Is undue hardship imposed on the employee? 5 Is the public interest reasonably protected?" *Arvidson v. Buchar, 2019 VI SUPER 122 (Super. Ct. V.I. Sept. 10, 2019).* <https://usvipublicportal-api.vicourts.org/courts/87edff36-c02b-4073-aea4-c0652bc123d9/cms/case/7432A3F8-AD71-45C5-B028-B4471D746A4E/docketentrydocuments/27b98266-7d9f-405f-b7ba-c221f8db0a97>
+
+[^arvidson-factintensive]: **Arvidson v. Buchar** — "reasonableness is a fact intensive inquiry that depends on weighing the totality of the circumstances" *Arvidson v. Buchar, 2019 VI SUPER 122 (Super. Ct. V.I. Sept. 10, 2019).* <https://usvipublicportal-api.vicourts.org/courts/87edff36-c02b-4073-aea4-c0652bc123d9/cms/case/7432A3F8-AD71-45C5-B028-B4471D746A4E/docketentrydocuments/27b98266-7d9f-405f-b7ba-c221f8db0a97>
+
+[^banks-section4]: **Banks v. International Rental & Leasing Corp.** — "The rules of the common law, as expressed in the restatements of the law approved by the American Law Institute, and to the extent not so expressed, as generally understood and applied in the United States, shall be the rules of decision in the courts of the Virgin Islands in cases to which they apply, in the absence of local laws to the contrary." *Banks v. Int'l Rental & Leasing Corp., 55 V.I. 967 (V.I. 2011).* <https://www.courtlistener.com/opinion/8676262/banks-v-international-rental-leasing-corp/#:~:text=The%20rules%20of%20the%20common,local%20laws%20to%20the%20contrary.>
+
+[^banks-method]: **Banks v. International Rental & Leasing Corp.** — "We conclude that the Legislature did not intend for section 4 of title 1 to compel this Court to mechanically apply the most recent Restatement." *Banks v. Int'l Rental & Leasing Corp., 55 V.I. 967 (V.I. 2011).* <https://www.courtlistener.com/opinion/8676262/banks-v-international-rental-leasing-corp/#:~:text=We%20conclude%20that%20the%20Legislature,apply%20the%20most%20recent%20Restatement.>
+
+[^connor-factors]: **Government of the Virgin Islands v. Connor** — "Rather, this Court has instructed that, instead of mechanistically following the Restatements, courts should consider ‘three non-dispositive factors’ to determine Virgin Islands common law: ‘(1) whether any Virgin Islands courts have previously adopted a particular rule; (2) the position taken by a majority of courts from other jurisdictions; and (3) most importantly, which approach represents the soundest rule for the Virgin Islands.’" *Gov't of the V.I. v. Connor, 60 V.I. 597 (V.I. 2014).* <https://cdnsm5-hosted.civiclive.com/UserFiles/Servers/Server_12810860/File/Opinions/Published/2014/File16.pdf>
+
+[^arvidson-scope]: **Arvidson v. Buchar** — "The Covenant to not compete does not pass the three pronged business interest test and, by failing to provide time, place, and manner restrictions, is overly broad and invalid" *Arvidson v. Buchar, 2019 VI SUPER 122 (Super. Ct. V.I. Sept. 10, 2019).* <https://usvipublicportal-api.vicourts.org/courts/87edff36-c02b-4073-aea4-c0652bc123d9/cms/case/7432A3F8-AD71-45C5-B028-B4471D746A4E/docketentrydocuments/27b98266-7d9f-405f-b7ba-c221f8db0a97>
+
+[^dixon-void]: **V.I. Diving Schools/Supplies, Inc. v. Dixon** — "restrictive clauses of the agreement are void and unenforceable as against public policy on the ground that they are unreasonable restraint on competition." *V.I. Diving Schools/Supplies, Inc. v. Dixon, Civ. No. 1046/1982 (Terr. Ct. V.I. Oct. 7, 1983).* <https://cdnsm5-hosted.civiclive.com/UserFiles/Servers/Server_12810747/File/Opinions/Archive/VI%20Diving%20Sch%20v.%20Dixon%20%28IAM%29.pdf>
+
+[^arvidson-consideration]: **Arvidson v. Buchar** — "is supported by valid consideration" *Arvidson v. Buchar, 2019 VI SUPER 122 (Super. Ct. V.I. Sept. 10, 2019).* <https://usvipublicportal-api.vicourts.org/courts/87edff36-c02b-4073-aea4-c0652bc123d9/cms/case/7432A3F8-AD71-45C5-B028-B4471D746A4E/docketentrydocuments/27b98266-7d9f-405f-b7ba-c221f8db0a97>
+
+[^arvidson-wda]: **Arvidson v. Buchar** — "24 V I C § 76 (the Virgin Islands Wrongful Discharge Act enumerating only nine reasons for which an employer may lawfully discharge an employee after qualifying for protection under the statute)" *Arvidson v. Buchar, 2019 VI SUPER 122 (Super. Ct. V.I. Sept. 10, 2019) (citing 24 V.I.C. § 76).* <https://usvipublicportal-api.vicourts.org/courts/87edff36-c02b-4073-aea4-c0652bc123d9/cms/case/7432A3F8-AD71-45C5-B028-B4471D746A4E/docketentrydocuments/27b98266-7d9f-405f-b7ba-c221f8db0a97>
+
+[^q5-arvidson-wda]: **Arvidson v. Buchar** — "24 V I C § 76 (the Virgin Islands Wrongful Discharge Act enumerating only nine reasons for which an employer may lawfully discharge an employee after qualifying for protection under the statute)" *Arvidson v. Buchar, 2019 VI SUPER 122 (Super. Ct. V.I. Sept. 10, 2019) (citing 24 V.I.C. § 76).* <https://usvipublicportal-api.vicourts.org/courts/87edff36-c02b-4073-aea4-c0652bc123d9/cms/case/7432A3F8-AD71-45C5-B028-B4471D746A4E/docketentrydocuments/27b98266-7d9f-405f-b7ba-c221f8db0a97>
+
+[^q6-arvidson]: **Arvidson v. Buchar** — "the soundest rule for the Virgin Islands is the equitable reformation approach" *Arvidson v. Buchar, 2019 VI SUPER 122 (Super. Ct. V.I. Sept. 10, 2019).* <https://usvipublicportal-api.vicourts.org/courts/87edff36-c02b-4073-aea4-c0652bc123d9/cms/case/7432A3F8-AD71-45C5-B028-B4471D746A4E/docketentrydocuments/27b98266-7d9f-405f-b7ba-c221f8db0a97>
+
+[^q6-arvidson-strict]: **Arvidson v. Buchar** — "Accordingly, the Court implements this rule with a greater willingness to refuse to reform agreements that are not reasonable on their face" *Arvidson v. Buchar, 2019 VI SUPER 122 (Super. Ct. V.I. Sept. 10, 2019).* <https://usvipublicportal-api.vicourts.org/courts/87edff36-c02b-4073-aea4-c0652bc123d9/cms/case/7432A3F8-AD71-45C5-B028-B4471D746A4E/docketentrydocuments/27b98266-7d9f-405f-b7ba-c221f8db0a97>
+
+[^q6-dixon]: **V.I. Diving Schools/Supplies, Inc. v. Dixon** — "restrictive clauses of the agreement are void and unenforceable as against public policy on the ground that they are unreasonable restraint on competition." *V.I. Diving Schools/Supplies, Inc. v. Dixon, Civ. No. 1046/1982 (Terr. Ct. V.I. Oct. 7, 1983).* <https://cdnsm5-hosted.civiclive.com/UserFiles/Servers/Server_12810747/File/Opinions/Archive/VI%20Diving%20Sch%20v.%20Dixon%20%28IAM%29.pdf>
+
+[^q7-arvidson]: **Arvidson v. Buchar** — "reasonableness is a fact intensive inquiry that depends on weighing the totality of the circumstances" *Arvidson v. Buchar, 2019 VI SUPER 122 (Super. Ct. V.I. Sept. 10, 2019).* <https://usvipublicportal-api.vicourts.org/courts/87edff36-c02b-4073-aea4-c0652bc123d9/cms/case/7432A3F8-AD71-45C5-B028-B4471D746A4E/docketentrydocuments/27b98266-7d9f-405f-b7ba-c221f8db0a97>
+
+[^vic-11-1001]: **11 V.I.C. § 1001 — Uniform Trade Secrets Act (short title)** — "This chapter may be cited as the Uniform Trade Secrets Act." *11 V.I.C. § 1001.* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:56WP-9KS1-6G1M-90D3-00008-00>
+
+[^vic-11-1002]: **11 V.I.C. § 1002 — Definitions** — "‘Trade secret’ means information, including a formula, pattern, compilation, program, device, method, technique, or process" *11 V.I.C. § 1002.* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:56WP-9KS1-6G1M-90D5-00008-00>
+
+[^vic-11-1008]: **11 V.I.C. § 1008 — Effect of other law** — "This chapter does not affect: (1) contractual remedies, whether or not based upon misappropriation of a trade secret" *11 V.I.C. § 1008.* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:56WP-9KS1-6G1M-90DK-00008-00>
+
+[^vic-5-858]: **5 V.I.C. § 858 — Trade secrets privilege** — "A person has a privilege which may be claimed by him or his agent or employee, to refuse to disclose and to prevent other persons from disclosing a trade secret, owned by him, if the allowance of the privilege will not tend to conceal fraud or otherwise work injustice." *5 V.I.C. § 858.* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:56WP-9JF1-6G1M-90PJ-00008-00>
+
+[^dixon-notrade]: **V.I. Diving Schools/Supplies, Inc. v. Dixon** — "Plaintiff Virgin Islands Diving Schools presented no evidence of any trade secrets which the Defendants obtained that is worthy of protection." *V.I. Diving Schools/Supplies, Inc. v. Dixon, Civ. No. 1046/1982 (Terr. Ct. V.I. Oct. 7, 1983).* <https://cdnsm5-hosted.civiclive.com/UserFiles/Servers/Server_12810747/File/Opinions/Archive/VI%20Diving%20Sch%20v.%20Dixon%20%28IAM%29.pdf>
+
+[^vic-11-1503]: **11 V.I.C. § 1503 — Violations enumerated** — "By contract, combination, or conspiracy with one or more other persons unreasonably restrain trade or commerce" *11 V.I.C. § 1503.* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:56WP-9KS1-6G1M-90M3-00008-00>
+
+[^q10-arvidson]: **Arvidson v. Buchar** — "a contract which is only in partial restraint of trade may be valid and enforceable when it" *Arvidson v. Buchar, 2019 VI SUPER 122 (Super. Ct. V.I. Sept. 10, 2019).* <https://usvipublicportal-api.vicourts.org/courts/87edff36-c02b-4073-aea4-c0652bc123d9/cms/case/7432A3F8-AD71-45C5-B028-B4471D746A4E/docketentrydocuments/27b98266-7d9f-405f-b7ba-c221f8db0a97>
+
+[^vic-13-1702]: **13 V.I.C. § 1702 — Court action to determine fair value of distributional interest** — "a covenant not to compete or other restriction on a dissociated member" *13 V.I.C. § 1702.* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:56WP-9M71-6G1M-90VX-00008-00>
+
+[^ftc-removal]: **Removal of the Non-Compete Rule from the CFR** — "this final rule removes the Non-Compete Rule codified at 16 CFR part 910 from the Code of Federal Regulations" *Removal of the Non-Compete Rule, 91 Fed. Reg. 6507 (Feb. 12, 2026).* <https://www.federalregister.gov/documents/2026/02/12/2026-02866/revision-of-the-negative-option-rule-withdrawal-of-the-cars-rule-removal-of-the-non-compete-rule-to>