Are Independent Contractors Subject to Louisiana’s Non-Compete Law?
The validity of non-compete agreements in Louisiana is strictly controlled by a single statutory provision (La. R.S. 23:921) and its judicial interpretations. La. R.S. 23:921(A)(1) begins with the general prohibition against any agreement whereby anyone is restrained from exercising a lawful profession, trade, or business, unless one of the narrow exceptions to the general prohibition contained therein is satisfied. It provides:
Every contract or agreement, or provision thereof, by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, except as provided in this Section, shall be null and void.
Louisiana has long had a strong public policy against non-compete agreements. Because these agreements are in derogation of the common right — the right to work in your chosen field — Louisiana jurisprudence has narrowly construed the exceptions to the general prohibition listed in La. R.S. 23:921. These exceptions, for the most part, are based upon relationships. The list of exceptions include the employee/employer relationship, the sale of the goodwill of a business, the dissolution of a partnership, the franchisor/franchisee relationship, the employer/computer employee relationship, the corporation/shareholder relationship, the partnership/partner relationship (without consideration of any possible dissolution), and the limited liability company/member relationship.
Can Louisiana’s non-compete law be used to stop an independent contractor from competing with your company? Yes - - - according to La. R.S. 23:921(C). It provides:
Any person, including a corporation and the individual shareholders of such corporation, who is employed as an agent, servant, or employee may agree with his employer to refrain from carrying on or engaging in a business similar to that of the employer and/or from soliciting customers of the employer within a specified parish or parishes, municipality or municipalities, or parts thereof, so long as the employee carries on a like business therein, not to exceed a period of two years from termination of employment. An independent contractor, whose work is performed pursuant to a written contract, may enter into an agreement to refrain from carrying on or engaging in a business similar to the business of the person with whom the independent contractor has contracted, on the same basis as if the independent contractor were an employee, for a period not to exceed two years from the date of last work performed under the written contract. (Emphasis added).
An independent contractor, therefore, can be subject to a valid non-compete agreement in Louisiana, if 1) their work is performed pursuant to a written contract, and 2) it’s for a period not to exceed two years from the date of the last work performed under the written contract. Unlike an employee, and whether purposeful or simply an error, the Louisiana legislature, in drafting language regarding independent contractors, does not allow a non-compete agreement to stop an independent contractor from soliciting customers of the business whom the independent contractor has contracted.
Once it is demonstrated that a particular non-compete agreement falls within this exception, most Louisiana courts also require a valid non-compete agreement to contain an area of prohibition described by parishes, municipalities, or parts thereof. This requirement is derived from statutory language. Note, however, that while the area of prohibition requirement is part of La. R.S. 23:921 (C) relating to employees, it is noticeably absent relating to independent contractors. The safer approach is to also include an area of prohibition by parishes, municipalities or parts thereof for independent contractors.
While not contained within the statute, some Louisiana courts also require a valid non-compete agreement to define narrowly and accurately the business in which the individual is prohibited from competing. Other Louisiana courts deny the need for this additional, non-statutory-based requirement. If the business is defined within the agreement, however, the definition must be narrow and accurate.
As demonstrated above, non-compete agreements can be used in Louisiana to stop independent contractors whose work is performed pursuant to a written contract from competing with the business with whom the independent contractor has contracted. To do so, however, the agreements should be narrowly drawn and in strict compliance with La. R.S. 23:921 in order to maximize your chances that your agreements will be enforced in Louisiana.