Legal Update

LEGAL update ENFORCING NON-COMPETE AGREEMENTS IN LOUISIANA BY: JUDE C. BURSAVICH, PARTNER, BREAZEALE, SACHSE & WILSON, L.L.P.

Are non-compete agreements enforceable in Louisiana? Yes, if drafted correctly. Are they difficult to enforce? No, Louisiana law actually makes it procedurally easy to enforce these agreements. Substantively, however, non-compete agreements must meet strict statutory requirements before Louisiana courts will enforce them. Thus, particular attention must be given in preparing non-compete agreements 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 both non-compete and non-solicitation agreements 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 accurately define 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 should be narrow and accurate.

As demonstrated herein, non-compete agreements in Louisiana can be enforceable. Preparing non-compete agreements that comply with Louisiana law, however, is critical to their enforceability.

Once you have enforceable non-compete agreements in place, Louisiana law makes enforcing these agreements procedurally easy.