Louisiana courts do not favor non-compete agreements because it is not healthy for a state to keep its people from working. Non-competes in Louisiana are governed by Louisiana Revised Statutes. The law provides that every agreement that restrains someone from engaging any profession is null and void unless the prohibition of competition meets one of the very specific exceptions outlined in La. R.S. 23:921. In today’s business environment, top employees and physicians seem to be the focus of non-compete disagreements. Businesses favor non-competes because they do not want to withhold certain information from its employee. In exchange for that release of information, they do not expect that employee to use that protected information later on to their detriment. The courts are constantly trying to balance the benefits of enforcing non-compete agreements and generally lean toward not enforcing them unless they absolutely have to.
In order to be enforcebale, a non-compete agreement can only restrict an employee “from carrying on or engaging in a business similar to that of the employer” and/or “from soliciting customers of the employer,” but even then, only if two conditions are met. First, there must be an expressly identified territory consisting of a list of parishes or municipalities in which the employer is operating. Second, the restriction can only be effective for a period of two years from the termination of employment, assuming that business is still operating.
In 2017, Louisiana courts issued consequential rulings concerning Louisiana non-compete agreements. In Paradigm Health System, LLC v. Faust, the First Circuit held a non-compete, which seemingly complied with the rules, invalid. In their ruling, they Court interpreted the non-compete law to require a clause that clearly identifies the specific nature of the employer’s business. For example, if an anesthesiologist is prohibited from practicing in Jefferson or Orleans parish, can he practice interventional pain medicine in those parishes?
In another case, the Fifth Circuit struck down a non-compete agreement because it determined the clause to be impermissibly broad. The clause contained language that restricted a former law partner from engaging in ANY business whose activities competed in ANY way with his previous employer.
Keys to Drafting an Enforceable Non-Compete Agreement
Louisiana courts strongly disfavor the enforcement of non-compete agreements. In other words, your non-compete agreement will most likely be presumed to be null and void, unless you clearly prove it is enforceable.
Second, make sure that your Non-Compete Agreement contains the following information:
- Restricts your former employee from “carrying on or engaging in a business similar” to that of yours (It is important to properly and narrowly define your business);
- Contains a list of parishes where competition is prohibited;
- Only restricts competition for two years;
- States what the former employee will be prohibited from doing;
- Contains a “savings clause”
While the above tips are a good start, as shown by the above cited cases, courts generally do not favor enforcing non-compete agreements.