re: Professional non-compete clauses

shite, I had a client once that had a carpet cleaning business and he hired a guy from another carpet cleaning business (that was owned by attorneys) and they had him sign a non-compete and tried to get an injunction to prevent him from working for my client, The judge threw the case out. I still laugh about the conversations I had with them over their stupidity.

Right To Work





TEXAS

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shite, I had a client once that had a carpet cleaning business and he hired a guy from another carpet cleaning business (that was owned by attorneys) and they had him sign a non-compete and tried to get an injunction to prevent him from working for my client, The judge threw the case out. I still laugh about the conversations I had with them over their stupidity.

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If I woke up one day in the Carpet Cleaning business, the last thing anyone on the planet would have to worry about is me remaining in the carpet cleaning business.

I guess you can make money there but that’s too close to janitorial services for my tastes.

You may have set a record for misinformation in one post.

Your lawyer is a pansy and you need a new one.

In the course of his employment, an employee may not only learn the business or trade of his employer, but he may also gain access to information of which the disclosure, or use by other persons, may have a negative impact on the employer's interest, such as industrial secrets or special procedures, marketing plans, or even lists of clients. Or an employer may invest substantial resources in training an employee for the performance of technical functions or managerial duties, which enables the employee to develop skills that are the equivalent of a capital the investment of which in competition with the interest of the employer, after termination of the employment relation, may not be fair. That interest of an employer is, no doubt, worthy of protection, which justifies the inclusion in some employment contracts of a clause whereby the employee binds himself not to compete with the employer in the latter's line of business after the employment relation comes to an end.

Nevertheless, the unrestricted protection of that interest would run counter the employee's interest in exercising his skill, or practicing his trade, on which his livelihood depends, an interest strongly connected to the employee's freedom. Louisiana Lawmakers have had to weigh those interests very carefully in order to resolve their conflict.

Here's some law on it:

To be enforceable against the employee, an agreement not to compete must be limited to a certain geographical area, to a certain time, and to a certain kind of business. In other words, conventional restrictions to an employee's freedom to work after termination of a particular employment relation are valid only if reasonably limited.

Concerning the area such an agreement is meant to cover, a failure to specify clearly the parishes, municipalities, or other geographically delimited spaces, where the employee binds himself not to compete with his former employer, makes the agreement null and void. Thus, an agreement that binds the employee to abstain from competition within a certain radius of a city measured in miles is not enforceable because it is not sufficiently clear. On the other hand, an agreement that binds the employee not to work for any of the employer's competitors anywhere in the continental United States, although clear as to its geographical reach, is not enforceable because the excessively broad geographical area makes it unreasonable. That is so even if the parties have provided in another clause that, if found too broad, that geographical area of application can be reduced to make it compatible with prevailing law.

Concerning the time limitation, the period of two years as maximum duration of such an agreement is expressed in the law with sufficient clarity to avoid difficulty in strictly complying with that provision.

Concerning the kind of business, an agreement will be valid only if the employee binds himself not to compete in a business similar to that of the employer, which calls for sufficient specificity in the description or indication of that business of the employer in which the employee will abstain from competition. Thus, in a case where the employer's business consisted of selling frozen alcoholic and non-alcoholic beverages of a certain kind, the court found invalid an agreement whereby the employee had bound himself not to sell frozen drinks for consumption by the public in general after termination of his employment because, although the frozen beverages involved in the employer's business were limited in kind, the agreement would have prevented the employee from selling frozen beverages of all kinds.

See Francois Chiropractic Center v. Fidele, 630 So.2d 923 (La. App. 4th Cir. 1993).
Johnson Controls, Inc. v. Guidry, 724 F. Supp. 2d 612 (W.D. La. 2010) (noncompetition clause that fails to specific the parishes to which it applies is unenforceable); Heart's Desire, LLC v. Edwards, 46-222 La. App. 2 Cir. 4/27/11, 2011 WL 1630175 (La. Ct. App. 2d Cir. 2011) (unpublished) (“Lack of geographical restriction in a noncompetition agreement is fatal to the agreement and renders it invalid and unenforceable… . Moreover, reformation of an otherwise invalid noncompetition clause would run counter to the requirement of strict and narrow construction, would allow ambiguous noncompetition agreements and would place courts in the business of either saving or writing a contract that is not generally favored in the law.”).

Defendant cannot prohibit competition in parishes in which it does not do business nor can a defendant prohibit competition in “Texas, Mississippi, Alabama, and Florida” without listing specific municipalities. In re Gulf Fleet Holdings, Inc., 2011 WL 1313901 (Bankr. W.D. La. 2011). Because of the severability clause in the agreement, the court was able to strike the references to Texas, Mississippi, Alabama, and Florida and render unenforceable in Louisiana parishes where the defendant does not do business.) Id.; see also Arthur J. Gallagher & Co. v. Babcock, 2011 WL 121891 (E.D. La. 2011) (Noncompetition clause that prohibited defendants from engaging in insurance-related business in each of Louisiana's sixty-four parishes was overbroad, but, given the severability clause, the agreement could be reformed to prohibit competition in the nine parishes in which the defendant sold life and health insurance was proper.).
See Bail Bonds Unlimited, Inc. v. Chedville, 831 So.2d 403 (La. App. 5th Cir. 2002), in which the court finds a non-compete clause overly broad and therefore unenforceable in case where appellees were employed by plaintiff as fugitive recovery agents.

The supreme court has placed further limitations on agreements not to compete. In, SWAT 24 Shreveport Bossier, Inc. v. Bond, 808 So.2d 294 (La. 2001), the court interprets La. R.S. 23:921(C) as permitting an employee to agree with an employer to refrain from carrying on or engaging in his own competing business and from soliciting customers of the employer, subject to certain geographical and time limits. This case abrogates Scariano Bros., Inc. v. Sullivan, 719 So.2d 131 (La. App. 4th Cir. 1998) and Moreno & Assoc. v. Black, 741 So.2d 91 (La. App. 3d Cir. 1999), resolving a split in the circuits. (Traylor dissents). The court, however, finds the impermissibly overbroad provision is severable because the contract contained a severability clause. Action Revenue Recovery, L.L.C. v. eBusiness Group, L.L.C., 17 So. 3d 999, 29 I.E.R. Cas. (BNA) 1505 (La. Ct. App. 2d Cir. 2009).

Comet Industries, Inc. v. Colvin, 600 So.2d 89 (La. App. 2d Cir. 1992); C's Discount Pharmacy, Inc. v. Louisiana CVS Pharmacy, L.L.C., 2013 WL 5505727 (E.D. La. 2013). Id. Plunk v. LKQ Birmingham, Inc., 2013 WL 5913755 (W.D. La. 2013). But see Brock Services, L.L.C. v. Rogillio, 936 F.3d 290 (5th Cir. 2019) (The district court did not err in reforming the overbroad geographical scope of a non-competition agreement “to narrow the provision's scope by removing catch-all clauses that went beyond the listed parishes.”); Heard, McElroy & Vestal, LLC v. Schmidt, 280 So. 3d 806 (La. Ct. App. 2d Cir. 2019) (Trial court did not abuse its discretion in engaging in “fairly extensive revisions” of noncompetition agreement in which the “trial court narrowed the geographic range to locations where [the plaintiff] conducted business activities, removed sentences from the solicitation provision, deleted part of the definition of client and deleted the provision that prohibited [the defendant] from being employed by [the plaintiff's] competitors.”). LSA-R.S. 23:921. See also Comet Industries, Inc. v. Lawrence, 600 So.2d 85 (La. App. 2d Cir. 1992). Smith v. Commercial Flooring Gulf Coast, L.L.C., 2019-502 La. App. 4 Cir. 10/9/19, So. 3d , 2019 WL 5073582 (La. Ct. App. 4th Cir. 2019) (Although the district court did not err in granting a preliminary injunction to enforce a noncompetition agreement, the court did err in extending it to a period of time not exceeding two years from the judgment because (1) the order would have effect for the maximum duration of noncompetition agreements, thus making it functionally a permanent injunction, and (2) the judgment exceeds the maximum period for noncompetition clauses because it extends for two years from the judgment, not from the time of the date of plaintiff's termination of employment.); Southeastrans, Inc. v. Landry, 2021 WL 972098 (W.D. La. 2021) (Section 23:921 of the Louisiana Revised Statute does not apply to an agreement not to solicit employees, and thus these agreements are not prohibited by statute. It does, however, require a “specific listing of every parish in which an employer intends to restrict competition and in which that employer carries on a like business for an agreement not to compete or to solicit customers to be valid and enforceable.”); Labby v. Labby Memorial Enterprises, LLC, 2020 WL 4586898 (W.D. La. 2020) (Non-competition agreement that purported to last 12 years terminated after two years in accordance with Section 23:921(B) of the Louisiana Revised Statutes.); Delta Fuel Co., Inc. v. Abbott, 515 F. Supp. 3d 564 (W.D. La. 2021) (A tolling provision in an employment contract that attempted to extend the two-year period in a non-competition agreement was unenforceable.). Daiquiri's III on Bourbon, Ltd. v. Wandfluh, 608 So.2d 222 (La. App. 5th Cir. 1992), writ denied Jan. 8, 1993.

In addition, the courts have held covenant not to compete was unenforceable where a doctor, who was a partner in partnership, signed an employment agreement in the capacity of an employee rather than a partner. Kimball v. Anesthesia Specialists of Baton Rouge, 809 So.2d 405 (La. App. 1st Cir. 2001). See also, Creative Risk Controls, Inc. v. Brechtel, 847 So.2d 20 (La. App. 5th Cir. 2003), the court held that a contract did not contain a non-compete clause to be breached, but it did contain a non-solicitation clause and the provisions of R.S. 23:921 also applied to it.

In contrast, see Richard Berry & Assoc. v. Bryant, 845 So.2d 1263 (La. App. 5th Cir. 2003), where the court found the R.S. 23:921 restricting enforcement of non-compete agreements applies to non-compete agreements with independent contractors on same basis as if independent contractor were an employee. A real estate broker attempted to enforce non-compete clause in contract with former independent contractors.

On the other hand, it has been held that the non-solicitation language of the statute does not apply to independent contractors. See Iberia Financial Services, LLC v. Mitchell, 2019-413 La. App. 3 Cir. 6/17/20, So. 3d , 2020 WL 3265136 (La. Ct. App. 3d Cir. 2020) (“Independent contractors cannot be refrained from soliciting customers. As such, we find that a claim for non-solicitation against an independent contractor does not exist.”).

In Terra Cotta's Cafe, L.L.C. v. Poole, 904 So.2d 918 (La. App. 3d Cir. 2005), reh'g denied, (July 13, 2005) and writ denied, 924 So.2d 174 (La. 2006), the appeal court reversed, holding that the evidence failed to support the trial court's finding that a non-compete agreement had been breached based in part on the lower court's overly broad interpretation of the term "cater."

Overly broad language was fatal to a non-compete agreement in Hose Specialty & Supply Management Co., Inc. v. Guccione, 865 So.2d 183 (La. App. 5th Cir. 2003), where the court refused to retroactively apply amendments to R.S. 23:921. See also Sola Communications, Inc. v. Bailey, 861 So.2d 822 (La. App. 3d Cir. 2003) (agreement too broad; amendments not retroactive), and Clear Channel Broadcasting, Inc. v. Brown, 901 So.2d 553 (La. App. 4th Cir. 2005) (no retroactive application of amendments to non-compete entered into prior to the effective date of the amendments); Paradigm Health System, L.L.C. v. Faust, 2016-1276 La. App. 1 Cir. 4/12/17, 2017 WL 1379096 (La. Ct. App. 1st Cir. 2017) (finding a noncompetition agreement that prohibits the defendant from engaging in the “practice of medicine” was overly broad and unenforceable and declining to find that … language in a noncompete agreement that prohibits an employee from engaging in a business similar to the employer is always in compliance with Louisiana's noncompete statute); Environmental Safety & Health Consulting Services, Inc. v. Fowler, 2019-813 La. App. 4 Cir. 3/11/20, So. 3d , 2020 WL 1173587 (La. Ct. App. 4th Cir. 2020) (Agreement prohibiting former employee from engaging in competition or solicitation was enforceable when it provided a two-year limitation, proscribed forty parishes, and defined the relevant business as “oil and hazardous spill containment.”); Board of Supervisors of Louisiana State University v. McCalmont, 339 So. 3d 1261 (La. Ct. App. 2d Cir. 2022) (declining to enforce a non-compete agreement between a teaching hospital and an obstetrician/gynecologist, even though the time and geographic scope were properly defined, because the “language limiting [the defendant's] livelihood was so overly broad as to be unenforceable” insofar as it attempted to restrict her “from using her medical license in any field of medicine at all, not just as an OBGYN but as a doctor in any capacity in Caddo or Bossier Parishes.”); Terral v. AG Resource Holdings, LLC, 335 So. 3d 1009 (La. Ct. App. 2d Cir. 2022) (finding unenforceable a noncompetition agreement that prohibited “the plaintiff from participating in any activity related to selling crop insurance or extending loans or lines of credit to farmers anywhere in the United States for a period of five years”).

tl;dr?

If you define your business properly, limit the geographical region narrowly, and meet the other statutory requirements, you can win a noncompete suit as an employer. Here, your lawyer must have drafted your agreement poorly, knew you couldn't win with it, and then told you that long parade of terrible instead of just telling you your agreement is unenforceable. Get a new lawyer to review your agreement.