In the competitive business world, businesses need to be aware of the means at their disposal to protect their interests. This issue could be approached from a number of angles, but we want to speak specifically about protecting a business’ interests from competition from former employees. This includes employees who leave to start their own business and employees who go on to work for a competitor.
Here in Louisiana, non-compete agreements with employees and independent contractors may be considered valid, provided they meet certain requirements. These limitations apply to length of time and geographical restrictions, and the scope of activities limited. In addition, non-compete agreements must involve protectable employer interests and must include proper “consideration,” a legal term which we’ll explain later. Finally, non-compete agreements are subject to judicial modification. In this and coming posts, we’ll speak about each of these points.
One of the common themes with non-compete agreements is that they must be reasonable. When it comes to the reasonableness of time restrictions, the clear rule is that covenants not to compete should not extend beyond two years after the termination of the employment relationship. Meeting this requirement is usually straightforward.
In terms of geographical restrictions, it is important for employers to understand that a reasonableness test can be applied to any such terms, though such a test is not consistently applied by all courts. In general, it is important for employers to at least be mindful of the reasonableness factor when setting geographic limitations, especially because courts strictly interpret non-compete agreements in favor of the employee when there is room for disagreement.
In our next post, we’ll continue exploring the other limitations on non-compete agreements here in Louisiana and how an experienced attorney can help a business cover its bases when establishing these agreements.