Noncompete agreements often fall short in Louisiana

This article looks at what noncompete clauses are and why they are hard to enforce in Louisiana.

Noncompete agreements are a controversial area of the law, with critics saying they prevent employees from finding new positions in their line of work, while others contend such agreements protect businesses from unfair competition. As PBS Newshour reports, about 40 percent of Americans have signed a noncompete agreement, but many of them have little or no understanding about what such an agreement entails for their future career prospects. Even businesses are often unaware of what a noncompete agreement can and cannot do and this is especially true in Louisiana where noncompete agreements are subject to different standards than in the rest of the country.

What is a noncompete agreement?

A noncompete agreement is a clause in an employment contract that prevents an employee from working for a rival company for a certain period of time and/or within a certain geographic area. The idea behind noncompete clauses is to prevent businesses from spending resources training employees and giving them access to valuable trade secrets only to see those employees take that training and those trade secrets to a competing company or to the 'highest bidder.'

In most states, noncompete agreements are subject to a reasonableness test, meaning that the restrictions that the agreement places on the employee cannot be unnecessarily broad or prevent him or her from finding new work. In most cases, this means that noncompete agreements cannot prevent employees from working for a competing company for an unduly long amount of time and cannot cover an unreasonably large geographic area.

Why Louisiana is different

In Louisiana, however, the situation is very different. As the Tulane Law Review points out, courts in Louisiana require strict construction of noncompete agreements that makes most of them null and void. The law in Louisiana is extremely narrow concerning noncompete agreements and instead of being subject to a reasonableness test most noncompete agreements are presumed to be invalid unless proven otherwise.

Exceptions exist, however, such as the sale of the goodwill of a business, the dissolution of a partnership, the relationship between the employer and employee, franchisor and franchisee, corporation and shareholder, partnership and partner, and employer and computer employee. However, even when such exceptions exist a court may require the noncompete agreement to further specify in narrow terms the types of business and activities that an employee is prevented from undertaking.

Business law help

Businesses are often surprised by just how different Louisiana's laws are from the rest of the country. That's why businesses operating in Louisiana should contact a business law firm today. An experienced law firm with a deep understanding of the state's laws can help businesses navigate the complex legal system and provide them with the peace of mind they need to succeed.