In La. R.S. 23:921, Louisiana law states 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 set forth in this Section shall be null and void. It is the Legislature’s way of making the general statement that the state of Louisiana wants people working.
However, Section (C) of this statute does allow a person who is employed as an agent, servant or employee to agree with his or her employer to refrain from carrying on or engaging in a business similar to that 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 the agreement. The statute requires that the parishes be specified and that the time period be for no longer than two years. Moreover, it requires that the employer carry on a like business therein. One question is what does it mean to carry on a like business in a particular parish?
This analysis seemed somewhat simple while businesses were carrying on from its four walls – a “bricks and mortar” method of operation. However, with advancing communication technology, especially the internet, the question must be asked, what does it mean to carry on a business in a parish? How has the information superhighway expanded the meaning of this term?
In Moores Pump and Supply, Inc. v. Laneaux, 727 So.2d 695 (La. App. 3d Cir. 1999), the court addressed this issue in connection with a preliminary injunction and a former employee’s argument that the non-compete agreement was invalid because it was geographically too broad. The court said Moores had at least established a prima facia case that it solicited business in all parishes listed in the agreement. The fact that it did not have a project in a particular parish during Mr. Laneaux’s tenure and/or did not have specific projects ongoing in all forty-three parishes did not require a finding that it was not doing business. According to the Third Circuit, solicitation of business was enough to constitute “carrying on a like business.”
What about the Internet? Does the fact an employer operates a website that extends into a specified parish constitute carrying on a like business? The answer is not known in the context of a non-compete agreement. However, the courts have been looking at on-line conduct to determine personal jurisdiction. If a business is operating over the internet through a highly interactive website, it may be deemed to be transacting business in a foreign state and subject to personal jurisdiction, without leaving the four walls of its building. The question is whether the answer will be the same when addressing the enforceability of a non-compete agreement. It is easy to see a situation whereby the business is physically located in a specific parish, and maybe even servicing some customers in an immediate outer lying parish, but otherwise simply soliciting business on the internet. The question will be is the employer carrying on business in more parishes and municipalities because it has an interactive website.
Our legislature has given some guidance as to what is a reasonable non-competition agreement as a matter of law. However, the question must be raised as to whether our methods of operation have outgrown the statute from a practical standpoint. Only time and a few rulings from courts will tell this tale.
For more information, contact Sonny Chastain at 225.389.3706 or firstname.lastname@example.org