Physician Noncompete Agreements In Louisiana--Still Viable

In the 2021 and earlier legislative sessions, the Louisiana Legislature considered limiting the use of non-compete agreements with physicians. From buyout provisions, geographical limitations to a complete prohibition on using these agreements for certain physicians, all efforts failed to limit the use of non-compete agreements with physicians. These agreements remain enforceable against Louisiana physicians today.

La. R. S. 23:921 and its judicial interpretation strictly control the enforceability of non-compete agreements in Louisiana. This single statutory provision governs the enforcement of these agreements against any individual in any profession, trade or business, including physicians. La. R.S. 23:921(A)(1) begins with a general prohibition against any agreement whereby anyone is retrained from exercising a lawful profession, trade or business, unless one of the listed exceptions to the general prohibition contained therein is satisfied. It provides:

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 provided in this Section, shall be null and void.

The statute then lists eight exceptions to this general prohibition. These exceptions are generally based upon relationships, including the employer/employee relationship, the sale of goodwill of a business, the dissolution of a partnership, the franchisor/franchisee relationship, the employer/computer employee relationship, the corporation/shareholder relationship, the partner/partnership relationship and the limited liability company/member relationship.

The Employer/Employee relationship is the most common exception to the general prohibition, and it is listed in 23:921(c). It provides in pertinent part:

Any person, including a corporation and individual shareholders of such corporation, who is employed as an agent, servant or employee may agree with his employer to refrain from carrying on or engaging in a business similar to that of the employer and/or from soliciting customers 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 employment…

To fall within the “safe haven” of all listed exceptions to the general prohibition, most Louisiana courts require a valid noncompete agreement to contain an area of prohibition listed by parishes, municipalities or parts thereof, together with a term of no longer than two years from the date of termination of the relationship. These requirements are derived directly from La. R.S. 23:921.

While not expressly required by the statute, some Louisiana courts also require that a valid noncompete agreement narrowly and accurately define the business in which the individual is prohibited from competing.[1] Other Louisiana courts deny the need for this additional non-statutory-based requirement.[2] However, if the business is defined within the agreement, the definition must be narrow and accurate.[3]

In Regional Urology, L.L.C. v. Price, 966 So. 2d 1087 (La. App. 2 Cir. 2007), a group practice sought to enforce a noncompete agreement against a physician, who in turn alleged that public policy should invalidate the agreement. The physician argued that enforcement of the agreement would limit the freedom of patients to choose their treating physician. The Second Circuit Court of Appeals in Shreveport, however, discounted this argument and enforced the agreement against the physician. In doing so, the Court provided:

Lastly, Dr. Price argues that we should nullify the noncompetition and non-solicitation agreement between the Members of Regional Urology for being against public policy. This we decline to do. The considerations raised by Dr. Price are compelling, particularly concerning the freedom patients should have to obtain treatment from a physician of their own choosing. However, these considerations were apparent when Dr. Price and the other physicians of Regional Urology signed the Amendment and put their own material concerns above that of patient choice. We find nothing in Louisiana’s public policy that would require us to nullify the agreement at issue. The policy concerns raised by Dr. Price are, as observed by the trial court, a matter for the legislature to address.

Under Louisiana law today, a properly drafted noncompete agreement meeting all the requirements of La. R.S. 23:921 can be enforced against a physician. In the future, however, it remains within the province of the Louisiana Legislature to either limit or exclude physicians entirely from being subject to these agreements if it chooses to do so.