In our last post, we began speaking about the potential usefulness of non-compete agreements for curbing employees’ ability to take valuable experience and knowledge to a competitor. Certain conditions must be met, however, for such agreements to be valid and enforceable in court.
The Louisiana statute recognizing non-compete agreements is relatively sparse on detail when it comes to limitations on these agreements, but case law has identified several important factors for employers to look out for. First of all, prenuptial agreements may not extend more than two years beyond the date employment ends. This rule is straightforward.
In terms of geographic limitations, state statute says that non-compete agreements must specify a “defined geographic territory” so that the area in which the agreement applies is identifiable. Unlike other states, Louisiana does not always apply a reasonableness test in terms of the geographic scope, and the courts are split on the matter. For businesses, consulting a knowledgeable attorney on the issue of geographic scope is, therefore, important to ensure a proper geographic scope is established in non-compete agreements.
Another important point is the scope of activities restricted by a non-compete agreement. State statute proves that employers may restrict post-employment activities by former partners, employees and franchisors. Case law is mixed on the question of whether an employer has to specifically define the employer’s business or the activities that are restricted rather than enjoining a blanket prohibition of working for or as a competitor.
In our next post, we’ll pick up on this point and wrap up this discussion.
Source: LA. REV. STAT. ANN. § 23:921.5