Will a Louisiana court enforce this employee non-competition covenant, and can it also bar the employee from working for a competitor?
Only if it fits a narrow statutory exception, and, since 2003, that exception reaches a former employee who merely goes to WORK for a competitor, not only one who starts a competing business. Louisiana Revised Statutes 23:921(D): “For the purposes of Subsections B, C, E, F, J, K, and L of this Section, a person who becomes employed by a competing business, regardless of whether or not that person is an owner or equity interest holder of that competing business, may be deemed to be carrying on or engaging in a business similar to that of the party having a contractual right to prevent that person from competing.” Louisiana Revised Statutes 23:921(A)(1): "Every contract or agreement, or provision thereof, by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, except as provided in this Section, shall be null and void." The same paragraph states the converse: "However, every contract or agreement, or provision thereof, which meets the exceptions as provided in this Section, shall be enforceable." The employee/independent-contractor exception, § 921(C), lets an employee "agree with his employer to refrain from carrying on or engaging in a business similar to that of the employer and/or from soliciting customers of the employer within a specified parish or parishes, municipality or municipalities, or parts thereof, so long as the employer carries on a like business therein, not to exceed a period of two years from termination of employment." Subsection (C) has a second sentence the heading of the exception hides: an independent contractor "whose work is performed pursuant to a written contract" may give the same undertaking "on the same basis as if the independent contractor were an employee, for a period not to exceed two years from the date of the last work performed under the written contract." The Louisiana Supreme Court resolved a circuit split over how far that exception reaches in SWAT 24 Shreveport Bossier, Inc. v. Bond, holding it applies "only to those agreements in which the employee agrees to refrain from carrying on or engaging in his own business similar to that of the employer": a covenant that instead bars the employee from becoming an EMPLOYEE of a competitor goes beyond the statutory exception. What SWAT 24 did about it matters as much as what it held: the Court did not void the agreement, it held that "we declare those offending portions null and void and sever them", that "The remaining portions of the Agreement cannot be construed to prohibit the actions the employee has taken subsequent to the termination of this employment with his former employer", and it affirmed the court of appeal and remanded. Enforcement of a covenant that does fit an exception is not discretionary either: § 921(H) makes such an agreement "an obligation not to do" and provides that "upon proof of the obligor’s failure to perform, and without the necessity of proving irreparable injury, a court of competent jurisdiction shall order injunctive relief enforcing the terms of the agreement." A Louisiana Court of Appeal has since enforced an employee covenant on exactly that footing: in Mark J. Smith v. Commercial Flooring Gulf Coast the Fourth Circuit held "the non-compete agreement is enforceable as it meets the exceptions as provided for in La. R.S. 23:921(C) and (D)", applying (C) and (D) together, and noted that "La. R.S. 23:1292(H) allows the issuance of a preliminary injunction, without a showing of irreparable harm" (the section number is the opinion’s own).
The trap
The trap today is the reverse of the one SWAT 24 created. In 2001 the Louisiana Supreme Court read § 921(C) to reach only the employee's OWN competing business: “we interpret the limited exception found in § 921(C) to the general nullity of such agreements to apply only to those agreements in which the employee agrees to refrain from carrying on or engaging in his own business similar to that of the employer.” The legislature answered with Acts 2003, No. 428, which added what is now subsection D, and Louisiana appellate courts have since cited SWAT 24 as “superseded by statute on other grounds.” So a covenant drafted to bar a former employee from being employed by a competitor is now inside the exception, provided it meets (C)'s parish-by-parish and two-year limits, and a party attacking such a clause on the strength of SWAT 24 is relying on superseded law. What has NOT changed: outside the listed parishes or municipalities, or beyond two years, the covenant is still null under § 921(A)(1). Smith also fixes when the two years start. The Fourth Circuit held that a judgment enjoining competition "for up to two years from the date of judgment impermissibly extends the time period to restrict competition" beyond what the law allows, and amended it so that "the maximum duration Mr. Smith can be preliminarily or permanently enjoined from competing with Priority is two years from the date of his termination". Drafting the clause from the date of judgment, or litigating for a year and expecting two more, loses the time. Separately, § 921(A)(2) (a distinctively broad, employee-protective rule) voids CHOICE-OF-FORUM and CHOICE-OF-LAW clauses in an employment contract outright: "The provisions of every employment contract or agreement, or provisions thereof, by which any foreign or domestic employer ... includes a choice of forum clause or choice of law clause in an employee's contract of employment ... or attempts to enforce either ... shall be null and void" unless the employee later, after the incident giving rise to the dispute, "expressly, knowingly, and voluntarily" ratifies it, so an out-of-state employer cannot route around § 921's substantive limits by simply picking another state's law to govern the employment agreement. Do not assume every non-compete-adjacent restriction needs § 921(C)'s geography-and-duration format, either: the statute separately authorizes goodwill-sale covenants (Subsection B), partnership-dissolution covenants (E), franchise covenants (F), computer-program-competition covenants (G), corporate-shareholder, partner and limited-liability-company-member covenants (J, K and L), and (as of the 2024 amendment) physician-specific covenants with their own three-year and five-year caps (M and N): each has its own scope and duration rule, and none of them is interchangeable with § 921(C)’s ordinary-employee rule. One trade is barred outright rather than regulated: § 921(I)(1) provides that "There shall be no contract or agreement or provision entered into by an automobile salesman and his employer restraining him from selling automobiles." And the physician caps do not reach every physician: § 921(O) takes Subsections M and N off entirely for a physician employed by or under contract with a rural hospital under the Rural Hospital Preservation Act, or with "a federally qualified healthcare center as defined in R.S. 40:1183.3 and which operates in a rural parish", and sends those contracts back to Subsection C, J, K or L instead.
20 authorities
- statuteLa. R.S. 23:921enactment date not established
The words that state the rule
Every contract or agreement, or provision thereof, by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, except as provided in this Section, shall be null and void. However, every contract or agreement, or provision thereof, which meets the exceptions as provided in this Section, shall be enforceable.
- statuteLa. R.S. 23:921enactment date not established
The words that state the rule
Any person, including a corporation and the individual shareholders of such corporation, who is employed as an agent, servant, or employee may agree with his employer to refrain from carrying on or engaging in a business similar to that of the employer and/or from soliciting customers of the employer within a specified parish or parishes, municipality or municipalities, or parts thereof, so long as the employer carries on a like business therein, not to exceed a period of two years from termination of employment. An independent contractor, whose work is performed pursuant to a written contract, may enter into an agreement to refrain from carrying on or engaging in a business similar to the business of the person with whom the independent contractor has contracted, on the same basis as if the independent contractor were an employee, for a period not to exceed two years from the date of the last work performed under the written contract.
- statuteLa. R.S. 23:921enactment date not established
The words that state the rule
The provisions of every employment contract or agreement, or provisions thereof, by which any foreign or domestic employer or any other person or entity includes a choice of forum clause or choice of law clause in an employee's contract of employment or collective bargaining agreement, or attempts to enforce either a choice of forum clause or choice of law clause in any civil or administrative action involving an employee, shall be null and void except where the choice of forum clause or choice of law clause is expressly, knowingly, and voluntarily agreed to and ratified by the employee after the occurrence of the incident which is the subject of the civil or administrative action.
The words that state the rule
we interpret the limited exception found in § 921(C) to the general nullity of such agreements to apply only to those agreements in which the employee agrees to refrain from carrying on or engaging in his own business similar to that of the employer.
- statuteLa. R.S. 23:921enactment date not established
The words that state the rule
For the purposes of Subsections B, C, E, F, J, K, and L of this Section, a person who becomes employed by a competing business, regardless of whether or not that person is an owner or equity interest holder of that competing business, may be deemed to be carrying on or engaging in a business similar to that of the party having a contractual right to prevent that person from competing.
- case2019-CA-0502 (La. App. 4 Cir. 10/9/19)Mark J. Smith v. Commercial Flooring Gulf Coast, L.L.C. D/B/A Priority FloorsLa. App. 4 Cir.decided 2019
The words that state the rule
SWAT 24 Shreveport Bossier, Inc. v. Bond, 2000-1695, p. 20 (La. 6/29/01), 808 So.2d 294, 307, superseded by statute on other grounds.
- statuteLa. R.S. 23:921enactment date not established
The words that state the rule
B. Any person, including a corporation and the individual shareholders of such corporation, who sells the goodwill of a business may agree with the buyer that the seller or other interested party in the transaction, will refrain from carrying on or engaging in a business similar to the business being sold or from soliciting customers of the business being sold within a specified parish or parishes, or municipality or municipalities, or parts thereof, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein, not to exceed a period of two years from the date of sale.
- statuteLa. R.S. 23:921enactment date not established
The words that state the rule
E. Upon or in anticipation of a dissolution of the partnership, the partnership and the individual partners, including a corporation and the individual shareholders if the corporation is a partner, may agree that the partners shall refrain from carrying on or engaging in a similar business within the same parish or parishes, or municipality or municipalities, or within specified parts thereof, where the partnership business has been transacted, not to exceed a period of two years from the date of dissolution. F.(1) Parties to a franchise may agree that: (a) The franchisor shall refrain from selling, distributing, or granting additional franchises to sell or distribute, within defined geographic territory, those products or services which are the subject of the franchise. (b) The franchisee shall: (i) During the term of the franchise, refrain from competing with the franchisor or other franchisees of the franchisor or carrying on or engaging in any other business similar to that which is the subject of the franchise. (ii) For a period not to exceed two years following severance of the franchise relationship, refrain from carrying on or engaging in any other business similar to that which is the subject of the franchise and from competing with or soliciting the customers of the franchisor or other franchisees of the franchisor.
- statuteLa. R.S. 23:921enactment date not established
The words that state the rule
G.(1) An employee may at any time enter into an agreement with his employer that, for a period not to exceed two years from the date of the termination of employment, he will refrain from engaging in any work or activity to design, write, modify, or implement any computer program that directly competes with any confidential computer program owned, licensed, or marketed by the employer, and to which the employee had direct access during the term of his employment or services.
- statuteLa. R.S. 23:921enactment date not established
The words that state the rule
M.(1) Any provision in a contract or agreement which restrains a primary care physician from practicing medicine shall not exceed three years from the effective date of the initial contract or agreement. Any subsequent contract or agreement between the employer and primary care physician executed after the initial three-year term shall not include noncompete provisions. (2) If the contract or agreement provided for in Paragraph (1) of this Subsection is terminated by the primary care physician prior to the initial three-year term, the primary care physician may be prohibited from carrying on or engaging in a business similar to that of the employer in the parish in which the primary care physician's principal practice is located and no more than two contiguous parishes in which the employer carries on a like business. The parishes shall be specified in the contract or agreement. The prohibition authorized in this Paragraph shall not exceed a period of more than two years from termination of employment. (3) For purposes of this Subsection, "primary care physician" means a physician who predominantly practices general family medicine, general internal medicine, general pediatrics, general obstetrics, or general gynecology. For any other physician, the provisions of Subsection N of this Section shall apply.
- statuteLa. R.S. 23:921enactment date not established
The words that state the rule
N.(1) For any physician other than a primary care physician as defined in Subsection M of this Section, any provision in a contract or agreement which restrains the physician from practicing medicine shall not exceed five years from the effective date of the initial contract or agreement. Any subsequent contract or agreement executed between the employer and the physician after the initial five-year term shall not include noncompete provisions. (2) If the contract or agreement provided for in Paragraph (1) of this Subsection is terminated by the physician prior to the initial five-year term, the physician may be prohibited from carrying on or engaging in a business similar to that of the employer in the parish in which the physician's principal practice is located and no more than two contiguous parishes in which the employer carries on a like business. The parishes shall be specified in the contract or agreement. The prohibition authorized in this Paragraph shall not exceed a period of more than two years from termination of employment.
- statuteLa. R.S. 23:921enactment date not established
The words that state the rule
Acts 2003, No. 428, §§1 and 2; Acts 2006, No. 436, §1; Acts 2008, No. 399, §1; Acts 2008, No. 711, §1; Acts 2010, No. 164, §1; Acts 2015, No. 404, §1; Acts 2020, No. 121, §1; Acts 2024, No. 273, §1, eff. Jan.1, 2025.
- statuteLa. R.S. 23:921enactment date not established
The words that state the rule
H. Any agreement covered by Subsection B, C, E, F, G, J, K, or L of this Section shall be considered an obligation not to do, and failure to perform may entitle the obligee to recover damages for the loss sustained and the profit of which he has been deprived. In addition, upon proof of the obligor's failure to perform, and without the necessity of proving irreparable injury, a court of competent jurisdiction shall order injunctive relief enforcing the terms of the agreement. Any agreement covered by Subsection J, K, or L of this Section shall be null and void if it is determined that members of the agreement were engaged in ultra vires acts. Nothing in Subsection J, K, or L of this Section shall prohibit the transfer, sale, or purchase of stock or interest in publicly traded entities.
- statuteLa. R.S. 23:921enactment date not established
The words that state the rule
I.(1) There shall be no contract or agreement or provision entered into by an automobile salesman and his employer restraining him from selling automobiles.
- statuteLa. R.S. 23:921enactment date not established
The words that state the rule
J. A corporation and the individual shareholders of such corporation may agree that such shareholders will refrain from carrying on or engaging in a business similar to that of the corporation and from soliciting customers of the corporation within a specified parish or parishes, municipality or municipalities, or parts thereof, for as long as the corporation carries on a similar business therein, not to exceed a period of two years from the date such shareholder ceases to be a shareholder of the corporation. A violation of this Subsection shall be enforceable in accordance with Subsection H of this Section. K. A partnership and the individual partners of such partnership may agree that such partners will refrain from carrying on or engaging in a business similar to that of the partnership and from soliciting customers of the partnership within a specified parish or parishes, municipality or municipalities, or parts thereof, for as long as the partnership carries on a similar business therein, not to exceed a period of two years from the date such partner ceases to be a partner. A violation of this Subsection shall be enforceable in accordance with Subsection H of this Section. L. A limited liability company and the individual members of such limited liability company may agree that such members will refrain from carrying on or engaging in a business similar to that of the limited liability company and from soliciting customers of the limited liability company within a specified parish or parishes, municipality or municipalities, or parts thereof, for as long as the limited liability company carries on a similar business therein, not to exceed a period of two years from the date such member ceases to be a member. A violation of this Subsection shall be enforceable in accordance with Subsection H of this Section.
- statuteLa. R.S. 23:921enactment date not established
The words that state the rule
O.(1) The provisions of Subsections M and N of this Section shall not apply to the following physicians: (a) Any physician who is employed by or under contract with a rural hospital as provided for in the Rural Hospital Preservation Act, R.S. 40:1189.1 et seq. (b) Any physician who is employed by or under contract with a federally qualified healthcare center as defined in R.S. 40:1183.3 and which operates in a rural parish as designated by the federal Office of Management and Budget at the time that the physician is hired. (2) For any physician exempted in this Subsection, the provisions of Subsection C, J, K, or L of this Section shall apply.
The words that state the rule
For the foregoing reasons, we conclude the language of La. R.S. 23:921(C) allows an employee to agree to refrain from carrying on or engaging in the employee's own business similar to that of the employer, subject to certain geographical and time limitations. Because the language of the Agreement at issue went beyond that permitted by the narrow exception of La. R.S. 23:921(C), we declare those offending portions null and void and sever them. The remaining portions of the Agreement cannot be construed to prohibit the actions the employee has taken subsequent to the termination of this employment with his former employer. The judgment of the court of appeal is therefore affirmed, and the case is remanded to the trial court for consideration of Bond's reconventional demands not yet considered. AFFIRMED AND REMANDED.
- case2019-CA-0502 (La. App. 4 Cir. 10/9/19)Mark J. Smith v. Commercial Flooring Gulf Coast, L.L.C. D/B/A Priority FloorsLa. App. 4 Cir.decided 2019
The words that state the rule
Based on the foregoing reasons, the non-compete agreement is enforceable as it meets the exceptions as provided for in La. R.S. 23:921(C) and (D). Accordingly, we amend and affirm as amended the district court’s judgment.
- case2019-CA-0502 (La. App. 4 Cir. 10/9/19)Mark J. Smith v. Commercial Flooring Gulf Coast, L.L.C. D/B/A Priority FloorsLa. App. 4 Cir.decided 2019
The words that state the rule
La. R.S. 23:1292(H) allows the issuance of a preliminary injunction, without a showing of irreparable harm, as one of the remedies to enforce a non-compete agreement. In the case sub judice, we find no abuse of the district court’s discretion to grant a preliminary injunction to enforce the non-compete agreement.
- case2019-CA-0502 (La. App. 4 Cir. 10/9/19)Mark J. Smith v. Commercial Flooring Gulf Coast, L.L.C. D/B/A Priority FloorsLa. App. 4 Cir.decided 2019
The words that state the rule
Second, a preliminary injunction that extends for up to two years from the date of judgment impermissibly extends the time period to restrict competition 17 allowed by law that Mr. Smith and Priority contracted for in the non-compete agreement. The non-compete agreement unambiguously stated that Mr. Smith would be prohibited from competition for “two years from the date of termination,” the time period that complies with the statutory period permitted by La. R.S. 23:1292(C). As such, based on the four corners of the contract, the maximum duration Mr. Smith can be preliminarily or permanently enjoined from competing with Priority is two years from the date of his termination
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.