Louisiana regulates noncompete agreements by statute. The statute declares that a noncompete is invalid unless the agreement complies with at least one of several exceptions based on the type of relationship. One of those exceptions is for employees to agree not to compete with a former employer provided the agreement specifies the parishes or municipalities where the former employer does business. A recent ruling from a Louisiana appellate court reminds once again that the failure to specify the parishes or municipalities the former employer wishes to protect is unenforceable.
- A Louisiana appellate court ruled that a restrictive covenant that didn’t identify parishes or municipalities where the employer did business was unenforceable.
- Louisiana courts are unlikely to red-pencil noncompete agreements that do not comply with statutory requirements, even if both parties agree to reformation provisions.
In Hoist & Crane Service Group, Inc. v. Standard Crane & Hoist, LLC., the court affirmed the district court’s ruling against the enforcement of a noncompete. The agreement barred the former employee from working for a competitor or soliciting Hoist & Crane Service Group’s (H&C) customers in “any geographic area or territory” where H&C did business. Louisiana courts construe restrictive covenants narrowly against enforcement. After noting the agreement did not comply with the statute by identifying the parishes or municipalities where H&C did business, the appellate court held the agreement did not comply with the statute and was therefore unenforceable.
H&C urged the court to reform the agreement in line with the agreement’s reformation clause, pointing out that the employee had agreed to the clause. The court rebuffed this request, refusing to use the reformation clause to supply the missing parishes and municipalities. The court explained that H&C’s request had asked it to rewrite a “disfavored contract into compliance with a narrowly drawn statute.”
The lessons here are pretty simple. Compliance with the Louisiana statute is not difficult, but an agreement will be enforced if and only if the agreement strictly complies with the statutory elements qualifying for an exception. The second lesson is that Louisiana courts will not “red-pencil” a noncompliant agreement into compliance, even if the parties agreed to a reformation clause. Because judicial reformation is unavailable, that lesson reinforces the first lesson: get it right the first time.