The history of non-compete agreements in Louisiana is somewhat convoluted and most answers on the recent history and current status are not simple answers. I will delve into that swamp in one or more later posts with concrete advice and general guidance for employers and employees alike.
The purpose of this post, however, is to provide a bit of background and perspective on non-compete agreements in general, not just in Louisiana.
Non-compete agreements are nothing new, with the earliest recorded case being a reported case in England in 1414. Generally, however, as with the doctrine of at-will employment, the actual use and acceptance, at least in some jurisdictions, of non-compete agreements, did not become common until the Industrial Revolution. Perhaps this slow development of the issue had more to do with the traditional restrictions on hiring, firing, and quitting for agricultural workers, who were the majority of the workforce, than any other factor. Pursuing additional protection simply was not an issue for most employers.
The vast majority of states allow for some or very broad enforcement of non-compete agreements. A 2012 survey of state laws only lists four states with complete or near complete prohibitions on non-compete agreements.
The issue of non-compete agreements seems to ebb and flow in employment law. Recently, it seems to be on the upswing as a litigated issue. According to an August 2013 Wall Street Journal article the last decade has seen a 60% increase in the amount of litigation between employers and former employees over non-compete clauses. As is accurately reported in the article, the reported opinions on which that percentage increase statistic is based, if anything, understates the amount of litigation. The reason given, which matches my experience, is that most non-compete litigation ends with a preliminary injunction proceeding in state court, and therefore no reported opinion for easy reference and research.
The reasons given in most sources for the employer desiring a non-compete agreement is to protect investments in training, protect trade secrets, protect business and customer relationships, and generally to promote stability in their workforce. The other side of the coin is the view that non-competes impair innovation, hamper start-up companies that would generate competition and jobs, With these larger social and economic goals in mind, a number of states have moved to legislatively limit or completely eliminate non-compete agreements. One reason given by some for California's success with start-up companies, particularly in technology, is the refusal to allow non-compete agreements.
Another interesting wrinkle, as reported more recently in the Wall Street Journal, is the difficulties older executives run into when they retire, but then find that they want or need to remain active in business.
The best short critique from an HR standpoint that I have seen is a brief article by Heather Bussing, which I recommend for a careful reading. The gist of her argument is that non-competes are often found unenforceable, are not particularly effective at protecting trade secrets, and that the litigation is often more profitable for the attorneys than either party. All of these points have validity, with the order of importance varying by jurisdiction. In any event, I recommend you digest her thoughts directly.
Two of Ms. Bussing's critiques have been particularly true in my experience. As I was taught a long time ago in a security class in the military, a secret is nothing more than information for which the release date has been delayed. The reality is that very few pieces of information are as secret as many believe, and even fewer meet the legal definition of a trade secret. Also, the only thing worse than not having a non-compete in place, for example, with regard to every member of your aggressive, trained, and profitable sales force is having a badly drafted one, suing over it, and having the world learn that all of your employees really are free to be poached.
These perspectives lead me to the most important point for any employer contemplating putting in place non-compete agreements, whether for a select few key employees or for most or all of their workforce. The body of law on non-competes is truly a patchwork, and it pays to have an attorney in the state in which the employee(s) will work draft it. Failure to do so will often render the entire exercise counterproductive.