Louisiana Court Rules Employee Nonsolicitation Agreements Are Not Governed by Noncompete Law, but Duration Must Be Limited

Quick Hits

• A Louisiana appellate court held that the state’s noncompete statute did not apply to employee nonsolicitation agreements, but such agreements must nevertheless “be reasonable in scope and duration.”
• The court found that the nonsolicitation provision at issue was void of any indication as to the duration of the prohibition, implying an infinite duration.
• The court’s refusal to reform the agreement aligns with state case law exhibiting hostility to contractual limits on a former employee’s freedom to compete with his or her former employer.

While noncompete agreements prohibit employees from working for a competitor after leaving their former employer, employee nonsolicitation agreements prohibit those employees from attempting to persuade other employees to leave the company and join the competitor. Many employers incorporate these “anti-poaching” provisions into restrictive covenants to further protect their interests from competition from former employees.

In general, noncompete agreements are unenforceable in Louisiana unless they comply with La. R.S. 23:921. That is, they must include: (1) a duration not to exceed two years following the termination of employment; (2) a list of the parishes and cities in which the former employee is restrained; and (3) that the former employee works for a business that competes with the business of the former employer.

Louisiana courts view employee nonsolicitation agreements as not subject to those same requirements, even though employee nonsolicitation provisions are often included with noncompete agreements. Courts instead require that employee nonsolicitation provisions be reasonable in scope and duration.

A Louisiana appellate court recently revisited this question in Brown & Root Industrial Services, LLC v. Farris. The Louisiana Court of Appeal, First Circuit, analyzing an employee nonsolicitation agreement contained in a separation agreement, held La. R.S. 23:921 did not apply to the agreement. Unlike noncompete agreements, the court recognized, employee nonsolicitation agreements are “not expressly disfavored by law” because they do not prohibit an employee from exercising his or her trade but merely restrict those who can be recruited to the employee’s new company. Instead, such agreements must be reasonable in scope and duration.

Applying this standard to the employee nonsolicitation provision in Farris, the court found unreasonable a prohibition on the solicitation of “any individual employed by the Company within the last twelve (12) months of your employment with the Company.” Despite the reference to a twelve-month period, the court held the provision did not include any durational limit during which the former employee was prohibited from poaching employees. Rather, the limit applied to the particular Brown & Root employees the former employee was prohibited from soliciting. The court found the provision devoid of any indication as to the duration of the prohibition, implying an infinite duration. The court cited a twelve-month duration with approval and noted another Louisiana court had declined to enforce an eighteen-month term.

Holding such a provision unreasonable in duration, the court declined to reform the provision, despite a clause in the agreement allowing it to do so. The court looked to other cases that had evaluated noncompete agreements with reformation clauses under La. R.S. 23:921 and held, that although nonsolicitation clauses are not subject to La. R.S. 23:921 or expressly disfavored by law, reform would require the court to “fashion[]” a new term where the agreement was “purposely silent as to any term.” The court’s refusal to reform the agreement aligns with Louisiana case law exhibiting hostility to contractual limits on a former employee’s freedom to compete with his or her former employer.

Key Takeaways

While not subject to the strict requirements of La. R.S. 23:921, nonsolicitation provisions must nevertheless be reasonable in scope and duration. What is reasonable will depend on the facts and circumstances, but it is clear that the durational limit applies to the restriction on the former employee, not on the employees he or she is prohibited from soliciting. This decision again reminds Louisiana employers of the value of getting restrictive agreements right at the drafting stage because reformation provisions in noncompliant agreements are unlikely to be enforced.

Ogletree Deakins’ New Orleans office and Unfair Competition and Trade Secrets Practice Group will continue to monitor developments and will provide updates on the Louisiana and Unfair Competition and Trade Secrets blogs as additional information becomes available.

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