Enforceability of Non-Compete Agreements in Louisiana:

Non-compete agreements, also known as restrictive covenants, are used by employers all over the country to stop workers who leave or who are fired from working for a rival company or launching a rival venture.  Non-compete clauses are intended to assist businesses in preventing former managers, staff members, or other individuals with a unique connection to the business from engaging in business competition.

Because non-compete clauses often prohibit someone from “exercising a lawful profession, trade, or business of any kind,” they are discouraged in Louisiana.  As a result, unless they fall under one of the tight exclusions allowed by La. R.S. 23:921, non-compete agreements are not enforceable in Louisiana.

What is a Non-Compete Agreement?

A non-compete agreement is a provision in a contract that prohibits an employee from working for rival companies or launching a rival enterprise for a predetermined amount of time after quitting their current position.  These agreements serve to deter employees from using information they learned during their employment with one company to help a competing business gain a competitive edge, or from using that information to start their own competitive ventures.  They are also frequently used when an owner sells a company to prevent the former owner from starting an identical company for a set amount of time.

Requirements for Enforceability:

Time Restriction:

First, the non-compete must have a time limitation.  Second, if this limitation is longer than two years from the date of termination of the employment, the non-compete is null.

Geographic Limitations:

The non-compete must have geographical and competitive elements in order to be deemed genuine.  The agreement must specify which parish or parishes, municipality or municipalities, or portions of them, are excluded from competing under the first component.  The non-compete agreement is void if it defines the restricted territory by referring to the employer’s business locations rather than listing any parishes or municipalities.  For instance, it might state that the former employee is not allowed to compete “within a 50-mile radius of any of the employers’ locations.”

Restriction on Scope of Activities:

A non-compete will be valid only if it obligates the employee “to refrain from carrying on or engaging in a business similar to that of the employer.”  An employer is only entitled to prohibit ex-employees from competing with the employer’s actual business and “not some overblown contractual definition of business designed to cover the proverbial waterfront and keep ex-employees from being able to make a living in any segment of the ex-employer’s industry.”  Therefore, how the non-compete describes the prohibited activities and the employer’s “business” is critical.

Louisiana Contract Law Attorneys:

We are a Gretna law firm that has served the New Orleans area since 1980.  Our experienced contract lawyers are well versed at business law and can help you prepare or negotiate non-compete agreements.  We take pride in offering a personal and trusted experience.  Call us today for a free consultation and find out why so many of our clients come back to us.