Three vital components of non-compete agreements

On Behalf of | Dec 28, 2022 | Blog, Business Law

Non-compete agreements give employers peace of mind that their employees can not legally take proprietary information to a competitor. Many businesses include noncompete agreements as part of the new hire documentation, and employment may depend on signing the contracts.

When written correctly, Louisiana law supports employers’ enforcement of these contracts. Employers should address the following issues to ensure the contracts meet the legal requirements.

1. Noncompete agreements must establish specific relationships

The state declares that non-compete agreements are only valid when certain relationships exist between the two parties. Some of the relationships are:

  • Buyer/ seller
  • Franchisor/franchisee
  • Corporation/shareholder
  • Partnership/ partner

Without proof of a relationship, employers can not enforce the agreements.

2. Employers must identify location restrictions

The state recognizes that people need to make money, and restricting employees from being able to work in their specialized fields in all geographical locations prevents them from earning an income. Therefore, non-compete agreements must identify the specific areas where the contract is enforceable. Employers should clearly state the municipalities and parishes where past employees can not pursue work. However, employers can only select the same locations where they do business.

3. Agreements must fit within the time limits

Non-compete agreements cannot restrict employment indefinitely. The state limits non-competes to two years, although employers could choose shorter time restrictions. After two years, employees can choose to work for competitors without violating their contracts.

Addressing the necessary details of non-compete agreements ensures employers can enforce their contracts. Courts may award damages equal to lost profits due to employees violating their non-compete agreements.