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Louisiana Non-Compete Agreement Template

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A Louisiana non-compete agreement is a written arrangement wherein one party must refrain from providing similar products or services as another party within specified municipalities or parishes. Non-competes are often presented to employees before starting a job for the purpose of protecting the employer’s business interests. After the employee leaves their position, they are prohibited from working in the same industry as their employer, engaging with their clients or customers, or starting their own competing business.

Louisiana law establishes strict parameters to maintain equity for both parties, such as limiting the duration of the agreement to two (2) years and restricting the geographical scope to areas of the state where business is conducted. There are other restrictions set forth by Louisiana statutes as well case law where exceptions have been made by courts of law as each situation is different.

Contents

Enforceability in Louisiana

A non-compete agreement is only enforceable when it adheres to Louisiana statute RS § 23:921. The types of situations where these agreements can be used are relationships between employer/employee, client/independent contractor, buyer/seller (of a business sale), corporation/shareholder, partnership/partner, and limited liability company/member.

When it IS Enforceable

  • Adheres to state law. An NCA has to meet the following criteria as outlined in state statutes:[1]
    • The duration of the non-compete is a maximum of two (2) years.
    • The geographical scope is limited to areas where the employer does business.
    • The geographical scope properly defines the parishes/municipalities/areas of the state that the agreement covers.
    • It only applies to the employer’s business interests, not any other industries or professions.
  • Describes nature of business. Courts generally will only enforce an NCA if it includes language that details the type of business the employer is in.[2] However, a Louisiana court enforced a non-compete agreement that didn’t include a description of the employer’s business as they decided they could compare both types of businesses using their own volition and determined them to be comparable enough to uphold the non-compete.[3]

When it’s NOT Enforceable

  • Lawyers. Unless the agreement pertains to retirement benefits, legal professionals may not enter into agreements that hinder their ability to practice law.[4]
  • Car salespeople. People in the business of selling new or used vehicles cannot be prevented from selling automobiles after working with an employer. Only applies to individuals licensed with the MVC or UMVC.[1]
  • Real estate agents. Real estate brokers are not permitted to impose an NCA on licensees unless they are given the option to rescind the agreement within a three-day period following the execution or delivery of the agreement, whichever is later.[5] Furthermore, the agreement must adhere to the same enforceability requirements as other non-competes, in addition to being drafted in 10-point, bold-faced block lettering font.

Maximum Time Period

Non-compete agreements are only enforceable if they do not extend past two (2) years after the date of termination of the employee or independent contractor.[1]

Geographical Area

The geographical scope of an NCA must be restricted to only those parts of Louisiana where the employer conducts business.[1] “Conducting business” can also mean that the employer advertises in those areas, or that they currently have or are soliciting customers in that area.[6] If an agreement does not specifically name the parish, municipality, or area within one of these districts, courts of law will often void the contract.[7] Furthermore, courts have looked unfavorably upon NCAs that use a radius from a certain point as a geographical restriction. However, they may choose to blue pencil the radius or certain jurisdictions to justifiably limit the geographical area and maintain the enforceability of the covenant.[8]

Consideration

In 1989 Louisiana law was modified to eliminate an employer’s obligation to provide consideration to employees in exchange for signing a non-compete agreement. However, there is a statute in the civil code stating that an obligation (i.e., a contract) cannot exist without lawful cause, which is essentially synonymous with the term “consideration.”[9] This means that Louisiana courts of law will generally accept employment[10] or continued employment[11] as lawful cause and will enforce non-compete agreements that provide such consideration.

Sources

  1. RS § 23:921
  2. Lafourche Speech v. Juckett, 652 So. 2d 679, 680-81 (La. Ct. App. 1995)
  3. Ticheli v. John, 996 So. 2d 437, 440-441 (La. Ct. App. 2008)
  4. La. R. Prof’l. Cond. Rule 5.6
  5. RS § 37:1448.1
  6. H2O v. Marquette, 06-930, 960 So. 2d 250 (La. Ct. App. 2007)
  7. Vartech Sys. v. Hayden, 951 So. 2d 247 (La. Ct. App. 2006)
  8. Amcom of Louisiana Inc. v. Battson, 670 So. 2d 1223 (La. 1996)
  9. CC § 1966
  10. Litigation Reprographics v. Scott, 599 So. 2d 922, 23 (La. Ct. App. 1992)
  11. Cellular One, Inc. v. Boyd, 653 So. 2d 30, 34 (La. Ct. App. 1995)
  12. Arthur J. Gallagher & Co. v. Babcock, 703 F.3d 284 (5th Cir. 2012)

Related Forms (2)

Louisiana Non-Disclosure Agreement – A contract presented to employees that helps protect employers’ confidential and proprietary information from unwanted dissemination.

Download: PDF, Word (.docx), OpenDocument


Frequently Asked Questions

Is blue penciling allowed in Louisiana?

Yes, blue penciling can be applied to certain non-compete agreement clauses as long as the contract has a provision stating that all sections of the contract will remain effective even if one section is found by a court of law to be unenforceable, which is known as a severability clause.[12] However, Louisiana courts will not reform contracts, i.e., language cannot be added or changed to modify provisions.