last update 6-11-2003

Non-Compete Agreements in Louisiana

Are you an Employer or Employee and don't know the rules for Louisiana non-compete agreements. Before you enter into one, you should talk to an attorney who is familiar with them.

Before getting into the basics of the rules, let me point out some significant changes that have taken place in 2001 and in 2003. There was a major decision by the La Supreme Court in June 2001 in the case of SWAT 24 Shreveport Bossier vs Bond that held that non-compete agreements can only apply to prohibit an individual who is going into business for himself or for a former employee soliciting customers of his former employer. Thus, if an employee merely goes to work for a competitor business, then the non-compete agreement is NOT applicable. With this new development in mind, please read on.

During the 2003 Legislative session, Act 428 was introduced to have the net effect of overriding the Swat 24 case. The Governor signed the act into law on June 18, 2003 and it will become effective on August 15, 2003. Specifically, that act modifies the statute by adding a new Sub section H to Revised Statute 23:921 to provide as follows:

	"H.  For the purposes of Subsections B and C, a person who
	becomes employed by a competing business, regardless of whether or
	not that person is an owner or equity interest holder of that
	competing business, may be deemed to be carrying on or engaging
	in a business similar to that of the party having a contractual
	right to prvent that person from competing."

The above change passed the House by a vote of 90-13 passed the Senate by a vote of 33 to 1. Thus, the revision has tremendous support in the Legislature.

Another major change that the Legislature enacted in 1999 was to state that any non-compete agreement that provides for a choice of law or forum for the litigation of a non-compete agreement is null and void except where the decision for choice of law or forum is made "after the occurrence" of the incident which is the subject of the litigation. Many employers try to include terminology in their agreements that say that the laws of their home state are the laws to apply or that the matter can be filed in a courthouse in their home state. This provision in the Louisana law says that type of provision in void, thus forcing the employer to litigate the matter in a Louisiana court and to apply Louisiana law.

Non-compete agreements are covered by statute at LRS 23:921 which begins by stating that every contract that restrains a person form exercising a lawful profession, trade, or business is is null and void unless it complies with the statutory requirements. Thus, you should read on.

First, the agreement cannot extend for a period of more than two (2) years from the date of the sale of a business or the termination of an employee's employment. If it does, then the agreement is void and unenforceable even if the claim is brought within two years. The fact that the agreement provides for a longer time than is allowed by statute makes the agreement void on its face.

Second, that two year period can be cut shorter if the buyer of a business or the employer goes out of business during that time. The statute says that the agreement is valid so long as the buyer is deriving benefit from the goodwill of the business or so long as the employer carries on a like business in the area designated.

Third, the geographical area that the agreement is to apply to must set forth in the agreement to be "a specified parish or parishes, municipality or municipalities, or parts thereof". Thus, an area of "50 miles from the office" is not a valid designation of the geographical area.

Such an agreement may be entered into by partners in a partnership, by shareholders in a corporation, by employees of an employer, by an independent contractor, and by franchisors and franchisees.

From the standpoint of the employee, one case has held that this type of agreement cannot be used to prevent a person from going to work for a competitor when the new position involves no solicitation of the customers of the former employer.

The contract is considered to be an agreement "not to do" the acts specified in the agreement. The employer can request the court to issue an injunction to stop the employee from competing and he can sue for damages and profits that he lost.

Non-Compete agreements can be used to a benefit if they are carefully worded and fit the requirements of the statute. If not, they are considered to be null and void.

========================  WARNING  =======================
                      AND DISCLAIMER
This information is provided for the reader's benefit in
becoming familiar with the legal matters discussed.  Your
particular facts may be different from the points above.
You should not rely on the above data without consulting a 
attorney to discuss the specific facts of your case
and the law of your state.

If you live in Louisiana and want to talk about your situation, please call me at:

    Marvin E. Owen
    3036 Brakley Drive
    Baton Rouge, La 70816
    ph 225-292-0099

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