Can Louisiana Non-Compete Agreements Prohibit Competition in Other States?
Non-compete Agreements in Louisiana are typically used to prohibit competition within Louisiana. Can these agreements be utilized to stop competition both in Louisiana and other states? It appears so, based upon case law decided by the Fourth and Fifth Circuit Courts of Appeal in Louisiana.
The validity of non-compete and non-solicitation agreements in Louisiana is controlled by a single statutory provision and its judicial interpretations. La. R.S. 23:921, Louisiana's controlling statute, begins with a 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 has been satisfied. It provides:
Every contract or agreement, or provision thereof, above 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.
This opening paragraph of La. R.S. 23:921 reflects Louisiana's strong public policy against these agreements. The exceptions to the general prohibition, for the most part, are based upon relationships. They include the employer/employee relationship, the sale of the goodwill of the business, the dissolution of a partnership, the Franchisor/Franchisee relationship and Employer/Computer Employee relationship. Additional exceptions added by the Louisiana Legislature in recent years are again based upon relationships. They include the Corporation/Shareholder relationship, the Partner/Partnership relationship, without consideration of any possible dissolution, and the Limited Liability Company/Member relationship.
Because these agreements are in derogation of the common right to earn a living, Louisiana jurisprudence has strictly construed these exceptions to the general prohibition. To fall within these exceptions, most Louisiana courts have required that non-compete agreements list the area of prohibition by parishes, municipalities, or parts thereof, together with a term no longer than two (2) years from the date of termination of the relationship.
Louisiana is the only state that uses the term “Parishes”. Every other state uses “Counties”, corresponding with Louisiana Parishes. Does a non-compete agreement which seeks to stop competition both in Louisiana and other states by using both ”Parishes” and “Counties” comply with the strict construction requirement regarding La. R.S. 23:921? It appears that it may. In provided:Hose Specialty & Supply Co., Inc. v. Guccione, 865 So.2d 183 (La. App. 5 Cir. 2003), the court
We find there is no significant difference between “parish or parishes” as used in the statute and “county or counties,” for both refer to the same type of geographic subdivision of a state. What is important is that the geographic limitation be express and clearly discernable. The agreement here satisfied that requirement by specifically listing the counties in Mississippi and Alabama to which the agreement applies. For this reason the geographic limitation is enforceable.
At least one other Louisiana Court of Appeal has reached the same result. Until the Louisiana Supreme Court ultimately decides this issue, however, it is unclear how other Louisiana courts of Appeal will rule on the Parishes versus Counties debate.
 Causin, L.L.C. v. Pace Safety Consultants, L.L.C., App. 4 Cir. 2019, 2018-0706 (La. App. 4 Cir. 1/30/19), 2019 WL 385206, writ denied, 271 So.3d 203 (La. App. 5/20/19).