Updated March 01, 2024
A Louisiana non-compete agreement is a contract that limits a person’s ability to refrain from working in a similar business. The non-compete must include the geographical areas, mentioning the parishes or localities specifically, and cannot be longer than a period of 2 years.
Laws
Legally Enforceable?
Yes, a non-compete is legally enforceable in Louisiana under the following conditions:[1]
- Must mention specific parishes and localities (and the employer must operate in such areas);
- Must mention the specific products and services refrained from working; and
- It cannot be for more than a 2 year period.
Specific Language
The non-compete scope of work should be specifically mentioned in the agreement.
For example, in Paradigm Health System v. Faust (2017), a non-compete was considered “overly broad” when Dr. Faust was prohibited from working in the “practice of medicine” and not specifically “pain management.”
Due to the broad language, the agreement was considered invalid under State law.
Car Salespersons (prohibited)
Anyone that works or is involved in the sales of motor vehicles is prohibited from entering into a non-compete.[2]
Even if the person is a manager of salespeople or related role, is exempt.[3]
Attorneys (prohibited)
An attorney is prohibited from entering an agreement that limits their ability to practice law.[4]
Continued Employment
Louisiana has ruled that continued employment is sufficient consideration to justify a non-compete agreement.[5]
Partnerships and Shareholders
Effective August 1, 2020, Louisiana allows non-competes for shareholders and partners in a business entity. It will enable entities to prohibit its owners from participating in related businesses in localities where the entity operates and for a period of up to 2 years.
Such non-compete covenants can also be included in the entity’s operating agreement, corporate bylaws, or partnership agreement.[6]
Sale of a Business
Any seller of a business may be held to a non-compete for a period of 2 years for the geographical areas where the business operated.[7]
Blue Penciling
A non-compete can be modified to the extent necessary to be legally enforceable.
Blue penciling does not apply if the agreement fails to specify a geographical area.[8]
If a non-compete does include a geographical area but has other terms that are overly broad, then the agreement can be modified.[9]
Any agreement that is to be modified under a Louisiana court must have a severability clause.[10]