Louisiana Expands Scope of Non-Competes Law to Include Partners, Shareholders and LLC Members
Louisiana’s amended non-competition statute (La. R.S. 23:921), which meaningfully expands the application of employment-related non-compete restrictions within the state, went into effect on August 1, 2020. This amendment expressly expands the reach of Louisiana non-compete law by, among other things, adding corporate shareholders, partners in partnerships, and members of limited liability companies, to the category of individuals who may be subject to employment non-competition obligations. This expansion of the law stands in stark contrast to the approach recently taken by many state legislatures across the country (e.g., Washington, Massachusetts, and Maryland), which have sought to narrow the categories of individuals (e.g., by age, wage, or FLSA classification) who may be subject to non-competes.
As now amended, La. R.S. 23:921 specifically identifies individual “shareholders of [a] corporation,” “partners of [a] partnership,” and “members of [a] limited liability company” as individuals who may also be subject to a non-compete agreement restricting them from “becom[ing] employed by” a competitive company. This amendment closes what could have been utilized as a technical loophole in non-compete enforcement, as previously a preexisting employment relationship was required in order to maintain a non-compete restriction.
Notably, the amendments to La. R.S. 23:921 do not change the general enforceability conditions for a non-compete agreement in Louisiana. Specifically, the non-compete obligation is still limited to application: (1) within a specified parish or parishes, municipality or municipalities, or parts thereof, (2) so long as the employer carries on a like business therein, and (3) may not exceed a period of two years.