Enforcing Non-Compete Agreements In Louisiana: A Litigator's Perspective
I have practiced law in Louisiana for almost 30 years. For over 20 years, I have specialized in drafting, enforcing and defending against non-compete agreements. In attempting to enforce these agreements, consider this important fact: Many courts dislike these agreements. This is understandable, considering that non-compete agreements deny individuals the right to earn a living in their chosen field of employment. Knowing this fact, it is imperative that non-compete agreements be drafted in compliance with all requirements of Louisiana law to maximize the chances of having your agreements deemed enforceable.
The validity of non-compete 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 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 non-compete 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 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, Louisiana jurisprudence has strictly construed these exceptions to the general prohibition. To fall within these exceptions, most Louisiana courts have required a valid non-compete agreement to list the area of prohibition by parishes, municipalities or parts thereof, together with a term of no longer than two (2) years from the date of termination of the relationship.
While not specifically contained within the statute, various Louisiana courts have also required that a valid non-compete agreement define the business accurately 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 should be narrow and accurate.
To improve your chances of enforcing your non-compete agreements, specific attention must be given in drafting your agreements. There should be no daylight between the language of your agreements and the verbiage of Louisiana statutory law. Otherwise, you are giving Louisiana courts an easy opportunity to strike down your agreements for failure to follow Louisiana statutory requirements. non-compete agreements that are drafted in compliance with all requirements of 23:921 maximize the chances of successfully enforcing your agreements in Louisiana courts.