Over the last two or three decades, non-compete agreements have become a common feature of employment contracts in almost every state. Many states, including Louisiana, have statutes that strictly define the terms and conditions under which such agreements can be enforced. The enforceability of such agreements has become an important issue in business law.
The essential purpose of a non-compete agreement is to limit an employee’s ability to use or sell the employer’s confidential or secret information, or to compete with the employer by working for a competitor. Many such agreements prevent the employee from working for a competitor for a specified period and in a specified geographic area. Non-competes are also used when a person sells a small business; the buyer often wants the seller to refrain from engaging in the same business for a specified period of time.
The Louisiana non-compete statute begins by stating that “every contract or agreement . . . by which anyone is restrained from exercising a lawful profession, trade, or business . . . shall be null and void.” The statute then enumerates a complex list of conditions that, if satisfied, exempt the profession or agreement from the ban on non-compete agreements. The list of such conditions is far too lengthy to be adequately summarized here. Perhaps the exception of broadest reach applies to agreements that limit a person from working for a competitor. Such agreements are generally enforceable if they do not last for more than two years and if they specify the municipality or parish in which the former employer is carrying on its business.
Whether a given non-compete agreement is valid can be very difficult to judge. Anyone who has been asked to sign a non-compete may wish to get more information about the agreement’s enforceability.