Louisiana Non-Compete Agreements – Are They Enforceable?
As someone who has reviewed, drafted and/or litigated hundreds of non-compete agreements in Louisiana over a 25 year span, I am often asked the same question. Are these agreements enforceable in Louisiana? The easy answer is yes, if drafted correctly. Doing so requires compliance with La. R.S. 23:921, the single statute in Louisiana governing the enforceability of these agreements. Failing to comply with the requirements of La. R.S. 23:921 is the “death knell” of your agreement.
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 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, the Employer/Computer Employee relationship, 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 must 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. 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.