We’ve been discussing the topic of non-compete agreements or covenants not to compete, focusing particularly on the restrictions that apply to such contracts. As we’ve mentioned, there are limitations on geography, length of time, the scope of activities restrained, and on what interests an employer can seek to protect through a non-compete agreement.
One important additional point to mention is that non-compete agreements which have unenforceable terms are not necessarily thrown out altogether. Courts here in Louisiana will often allow a “blue pencil” approach, which is where unenforceable provisions can be cut out from the agreement so that the remaining provisions of the non-compete can be enforced.
Courts here in Louisiana do not allow for a “red pencil” approach, though, which is where unenforceable provisions may be altered so as to make them enforceable. For this reason, each provision of a non-compete agreements must be carefully crafted since it cannot be altered in court if it is deemed unenforceable.
For businesses, again, it is important to have a solid understanding of what can and cannot be done in a non-compete agreement, and to develop best practices when utilizing this business tool. Entering into questionable agreements with employees may not actually help a company if the agreement is challenged in court and declared unenforceable. Not to mention the fact that such litigation can be costly for a business. Working with an experienced business law attorney is, therefore, essential for businesses that frequently use non-compete agreements.