Louisiana Enlarges Its Law on Non-Competition Agreements to Provide More Rights for Businesses
Currently, Louisiana law allows non-competition agreements between employers and employees. Louisiana Revised Statutes, section 23:921 allows an employee to agree with his employer to refrain from carrying on or engaging in a business similar to that of his employer and/or from soliciting customers of his employer, all within a specified parish or parishes, municipality or municipalities, or parts thereof so long as the employer carries on a like business within the restricted area. However, this non-competition agreement cannot last longer than two years from the end of the employment relationship.
Additionally, current Louisiana law allows agreements that prevent shareholders, partners, and members of a corporation, partnership, or limited liability company (LLC) from carrying on or engaging in activity similar to that of the business and from soliciting customers of the business within a specified parish or parishes, municipality or municipalities, or parts thereof, for as long as the entity carries on a similar business therein, not to exceed a period of two years from the date such shareholder, partner, or member ceases to be a shareholder, partner, or member of the business.
In 2020, the Louisiana Legislature amended La. R.S. 23:921 to allow a corporation, partnership, or LLC to enter into such agreements with their shareholders, partners, or members to prevent them from becoming employees of a business similar to that of the corporation, partnership, or LLC and/or soliciting customers of the corporation, partnership, or LLC within a specified parish or parishes, municipality or municipalities, or parts thereof so long as the corporation, partnership, or LLC carries on a like business within the restricted area. Prior to the 2020 amendment, Louisiana law did not explicitly permit corporations, partnerships, or LLCs to restrict shareholders, partners, or members from becoming employees of a competing business.
With the new law, corporations, partnerships, and LLCs are now able to restrict shareholders, partners, and members from competing against the entities either as owners, co-owners, and as employees. Thus, such a non-competition agreement in Louisiana is allowed as long as: 1) the non-competition agreement specifies a certain parish or parishes, a particular municipality or municipalities, or parts thereof; 2) the entity carries on a like business therein; 3) the agreement does not exceed a period of two years from termination of the relationship; 4) the agreement is specific in defining the nature of the business; and the non-competition agreement states the activities that the shareholders, partners, and members are prohibited from engaging in.
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This information has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please consult your attorney in connection with any specific situation under federal and/or Louisiana law and the applicable state or local laws that may impose additional obligations on you and/or your business.
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