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The FTC's Proposed Nationwide Ban on Non-Compete Agreements – Where Are We Today?

In January of 2023, the Federal Trade Commission (“FTC”) issued a proposed new rule banning non-compete agreements nationwide. The proposed rule sought not only a ban of future non-compete agreements, but also required recission of existing agreements. The FTC then sought public comments on the proposed rule before modifying the rule or issuing a final ruling. The public comment was extended until the Spring of 2023. It was then widely reported that the FTC’s vote on the proposed ban would not take place until April of 2024. At this point, it is unclear when the FTC will modify the proposed rule or issue a final rule. In the meantime, non-compete agreements are enforceable in Louisiana, if drafted correctly.

The validity of non-compete agreements in Louisiana is controlled by a single statute. La. R.S. 23:921, Louisiana's controlling statute, begins with a general prohibition against any agreement whereby anyone is restrained from exercising a lawful profession, trade, or business unless one of the narrow exceptions to the general prohibition contained therein has been 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.

This opening paragraph of La. R.S. 23:921 reflects Louisiana's strong public policy against these agreements. The exceptions to the general prohibition, for the most part, are based upon relationships. They include the employer/employee relationship, the sale of the goodwill of the business, the dissolution of a partnership, the Franchisor/Franchisee relationship, and the Employer/Computer Employee relationship. Additional exceptions added by the Louisiana Legislature in recent years are again based upon relationships. They include the Corporation/Shareholder relationship, the Partner/Partnership relationship, without consideration of any possible dissolution, and the Limited Liability Company/Member relationship.

Because these agreements are in derogation of the common right to earn a living, Louisiana jurisprudence has strictly construed these exceptions to the general prohibition. To fall within these exceptions, most Louisiana courts have required non-compete agreements to list the area of prohibition by parishes, municipalities, or parts thereof, together with a term of no longer than two (2) years from the date of termination of the relationship.

While not specifically contained within the statute, various Louisiana courts have also required that a valid non-compete agreement accurately define the business in which the individual is prohibited from competing. Other Louisiana courts deny the need for this additional non-statutory-based requirement. If the business is defined within the agreement, however, the definition should be narrow and accurate.

The FTC’s proposed ban appears primarily concerned with the Employer/Employee relationship. It is not clear how the FTC’s proposed rule, if it takes effect, would deal with other relationships in Louisiana where non-compete agreements are allowed, including the partner/partnership relationship, the corporation/shareholder relationship, and the limited liability company/member relationships.

The proposed rule, if it becomes final, will have to survive serious legal challenges by the individual states and the business community before ever effecting the use of non-compete agreements nationwide. It is therefore suggested in today’s competitive marketplace that the use of non-compete agreements in Louisiana continue until further notice.

The FTC's Proposed Nationwide Ban on Non-Compete Agreements – Where Are We Today?

In January of 2023, the Federal Trade Commission (“FTC”) issued a proposed new rule banning non-compete agreements nationwide. The proposed rule sought not only a ban of future non-compete agreements, but also required recission of existing agreements. The FTC then sought public comments on the proposed rule before modifying the rule or issuing a final ruling. The public comment was extended until the Spring of 2023. It was then widely reported that the FTC’s vote on the proposed ban would not take place until April of 2024. At this point, it is unclear when the FTC will modify the proposed rule or issue a final rule. In the meantime, non-compete agreements are enforceable in Louisiana, if drafted correctly.

The validity of non-compete agreements in Louisiana is controlled by a single statute. La. R.S. 23:921, Louisiana's controlling statute, begins with a general prohibition against any agreement whereby anyone is restrained from exercising a lawful profession, trade, or business unless one of the narrow exceptions to the general prohibition contained therein has been 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.

This opening paragraph of La. R.S. 23:921 reflects Louisiana's strong public policy against these agreements. The exceptions to the general prohibition, for the most part, are based upon relationships. They include the employer/employee relationship, the sale of the goodwill of the business, the dissolution of a partnership, the Franchisor/Franchisee relationship, and the Employer/Computer Employee relationship. Additional exceptions added by the Louisiana Legislature in recent years are again based upon relationships. They include the Corporation/Shareholder relationship, the Partner/Partnership relationship, without consideration of any possible dissolution, and the Limited Liability Company/Member relationship.

Because these agreements are in derogation of the common right to earn a living, Louisiana jurisprudence has strictly construed these exceptions to the general prohibition. To fall within these exceptions, most Louisiana courts have required non-compete agreements to list the area of prohibition by parishes, municipalities, or parts thereof, together with a term of no longer than two (2) years from the date of termination of the relationship.

While not specifically contained within the statute, various Louisiana courts have also required that a valid non-compete agreement accurately define the business in which the individual is prohibited from competing. Other Louisiana courts deny the need for this additional non-statutory-based requirement. If the business is defined within the agreement, however, the definition should be narrow and accurate.

The FTC’s proposed ban appears primarily concerned with the Employer/Employee relationship. It is not clear how the FTC’s proposed rule, if it takes effect, would deal with other relationships in Louisiana where non-compete agreements are allowed, including the partner/partnership relationship, the corporation/shareholder relationship, and the limited liability company/member relationships.

The proposed rule, if it becomes final, will have to survive serious legal challenges by the individual states and the business community before ever effecting the use of non-compete agreements nationwide. It is therefore suggested in today’s competitive marketplace that the use of non-compete agreements in Louisiana continue until further notice.

The FTC's Proposed Nationwide Ban on Non-Compete Agreements – Where Are We Today?

In January of 2023, the Federal Trade Commission (“FTC”) issued a proposed new rule banning non-compete agreements nationwide. The proposed rule sought not only a ban of future non-compete agreements, but also required recission of existing agreements. The FTC then sought public comments on the proposed rule before modifying the rule or issuing a final ruling. The public comment was extended until the Spring of 2023. It was then widely reported that the FTC’s vote on the proposed ban would not take place until April of 2024. At this point, it is unclear when the FTC will modify the proposed rule or issue a final rule. In the meantime, non-compete agreements are enforceable in Louisiana, if drafted correctly.

The validity of non-compete agreements in Louisiana is controlled by a single statute. La. R.S. 23:921, Louisiana's controlling statute, begins with a general prohibition against any agreement whereby anyone is restrained from exercising a lawful profession, trade, or business unless one of the narrow exceptions to the general prohibition contained therein has been 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.

This opening paragraph of La. R.S. 23:921 reflects Louisiana's strong public policy against these agreements. The exceptions to the general prohibition, for the most part, are based upon relationships. They include the employer/employee relationship, the sale of the goodwill of the business, the dissolution of a partnership, the Franchisor/Franchisee relationship, and the Employer/Computer Employee relationship. Additional exceptions added by the Louisiana Legislature in recent years are again based upon relationships. They include the Corporation/Shareholder relationship, the Partner/Partnership relationship, without consideration of any possible dissolution, and the Limited Liability Company/Member relationship.

Because these agreements are in derogation of the common right to earn a living, Louisiana jurisprudence has strictly construed these exceptions to the general prohibition. To fall within these exceptions, most Louisiana courts have required non-compete agreements to list the area of prohibition by parishes, municipalities, or parts thereof, together with a term of no longer than two (2) years from the date of termination of the relationship.

While not specifically contained within the statute, various Louisiana courts have also required that a valid non-compete agreement accurately define the business in which the individual is prohibited from competing. Other Louisiana courts deny the need for this additional non-statutory-based requirement. If the business is defined within the agreement, however, the definition should be narrow and accurate.

The FTC’s proposed ban appears primarily concerned with the Employer/Employee relationship. It is not clear how the FTC’s proposed rule, if it takes effect, would deal with other relationships in Louisiana where non-compete agreements are allowed, including the partner/partnership relationship, the corporation/shareholder relationship, and the limited liability company/member relationships.

The proposed rule, if it becomes final, will have to survive serious legal challenges by the individual states and the business community before ever effecting the use of non-compete agreements nationwide. It is therefore suggested in today’s competitive marketplace that the use of non-compete agreements in Louisiana continue until further notice.

The FTC's Proposed Nationwide Ban on Non-Compete Agreements – Where Are We Today?

In January of 2023, the Federal Trade Commission (“FTC”) issued a proposed new rule banning non-compete agreements nationwide. The proposed rule sought not only a ban of future non-compete agreements, but also required recission of existing agreements. The FTC then sought public comments on the proposed rule before modifying the rule or issuing a final ruling. The public comment was extended until the Spring of 2023. It was then widely reported that the FTC’s vote on the proposed ban would not take place until April of 2024. At this point, it is unclear when the FTC will modify the proposed rule or issue a final rule. In the meantime, non-compete agreements are enforceable in Louisiana, if drafted correctly.

The validity of non-compete agreements in Louisiana is controlled by a single statute. La. R.S. 23:921, Louisiana's controlling statute, begins with a general prohibition against any agreement whereby anyone is restrained from exercising a lawful profession, trade, or business unless one of the narrow exceptions to the general prohibition contained therein has been 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.

This opening paragraph of La. R.S. 23:921 reflects Louisiana's strong public policy against these agreements. The exceptions to the general prohibition, for the most part, are based upon relationships. They include the employer/employee relationship, the sale of the goodwill of the business, the dissolution of a partnership, the Franchisor/Franchisee relationship, and the Employer/Computer Employee relationship. Additional exceptions added by the Louisiana Legislature in recent years are again based upon relationships. They include the Corporation/Shareholder relationship, the Partner/Partnership relationship, without consideration of any possible dissolution, and the Limited Liability Company/Member relationship.

Because these agreements are in derogation of the common right to earn a living, Louisiana jurisprudence has strictly construed these exceptions to the general prohibition. To fall within these exceptions, most Louisiana courts have required non-compete agreements to list the area of prohibition by parishes, municipalities, or parts thereof, together with a term of no longer than two (2) years from the date of termination of the relationship.

While not specifically contained within the statute, various Louisiana courts have also required that a valid non-compete agreement accurately define the business in which the individual is prohibited from competing. Other Louisiana courts deny the need for this additional non-statutory-based requirement. If the business is defined within the agreement, however, the definition should be narrow and accurate.

The FTC’s proposed ban appears primarily concerned with the Employer/Employee relationship. It is not clear how the FTC’s proposed rule, if it takes effect, would deal with other relationships in Louisiana where non-compete agreements are allowed, including the partner/partnership relationship, the corporation/shareholder relationship, and the limited liability company/member relationships.

The proposed rule, if it becomes final, will have to survive serious legal challenges by the individual states and the business community before ever effecting the use of non-compete agreements nationwide. It is therefore suggested in today’s competitive marketplace that the use of non-compete agreements in Louisiana continue until further notice.

The FTC's Proposed Nationwide Ban on Non-Compete Agreements – Where Are We Today?

In January of 2023, the Federal Trade Commission (“FTC”) issued a proposed new rule banning non-compete agreements nationwide. The proposed rule sought not only a ban of future non-compete agreements, but also required recission of existing agreements. The FTC then sought public comments on the proposed rule before modifying the rule or issuing a final ruling. The public comment was extended until the Spring of 2023. It was then widely reported that the FTC’s vote on the proposed ban would not take place until April of 2024. At this point, it is unclear when the FTC will modify the proposed rule or issue a final rule. In the meantime, non-compete agreements are enforceable in Louisiana, if drafted correctly.

The validity of non-compete agreements in Louisiana is controlled by a single statute. La. R.S. 23:921, Louisiana's controlling statute, begins with a general prohibition against any agreement whereby anyone is restrained from exercising a lawful profession, trade, or business unless one of the narrow exceptions to the general prohibition contained therein has been 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.

This opening paragraph of La. R.S. 23:921 reflects Louisiana's strong public policy against these agreements. The exceptions to the general prohibition, for the most part, are based upon relationships. They include the employer/employee relationship, the sale of the goodwill of the business, the dissolution of a partnership, the Franchisor/Franchisee relationship, and the Employer/Computer Employee relationship. Additional exceptions added by the Louisiana Legislature in recent years are again based upon relationships. They include the Corporation/Shareholder relationship, the Partner/Partnership relationship, without consideration of any possible dissolution, and the Limited Liability Company/Member relationship.

Because these agreements are in derogation of the common right to earn a living, Louisiana jurisprudence has strictly construed these exceptions to the general prohibition. To fall within these exceptions, most Louisiana courts have required non-compete agreements to list the area of prohibition by parishes, municipalities, or parts thereof, together with a term of no longer than two (2) years from the date of termination of the relationship.

While not specifically contained within the statute, various Louisiana courts have also required that a valid non-compete agreement accurately define the business in which the individual is prohibited from competing. Other Louisiana courts deny the need for this additional non-statutory-based requirement. If the business is defined within the agreement, however, the definition should be narrow and accurate.

The FTC’s proposed ban appears primarily concerned with the Employer/Employee relationship. It is not clear how the FTC’s proposed rule, if it takes effect, would deal with other relationships in Louisiana where non-compete agreements are allowed, including the partner/partnership relationship, the corporation/shareholder relationship, and the limited liability company/member relationships.

The proposed rule, if it becomes final, will have to survive serious legal challenges by the individual states and the business community before ever effecting the use of non-compete agreements nationwide. It is therefore suggested in today’s competitive marketplace that the use of non-compete agreements in Louisiana continue until further notice.

The FTC's Proposed Nationwide Ban on Non-Compete Agreements – Where Are We Today?

In January of 2023, the Federal Trade Commission (“FTC”) issued a proposed new rule banning non-compete agreements nationwide. The proposed rule sought not only a ban of future non-compete agreements, but also required recission of existing agreements. The FTC then sought public comments on the proposed rule before modifying the rule or issuing a final ruling. The public comment was extended until the Spring of 2023. It was then widely reported that the FTC’s vote on the proposed ban would not take place until April of 2024. At this point, it is unclear when the FTC will modify the proposed rule or issue a final rule. In the meantime, non-compete agreements are enforceable in Louisiana, if drafted correctly.

The validity of non-compete agreements in Louisiana is controlled by a single statute. La. R.S. 23:921, Louisiana's controlling statute, begins with a general prohibition against any agreement whereby anyone is restrained from exercising a lawful profession, trade, or business unless one of the narrow exceptions to the general prohibition contained therein has been 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.

This opening paragraph of La. R.S. 23:921 reflects Louisiana's strong public policy against these agreements. The exceptions to the general prohibition, for the most part, are based upon relationships. They include the employer/employee relationship, the sale of the goodwill of the business, the dissolution of a partnership, the Franchisor/Franchisee relationship, and the Employer/Computer Employee relationship. Additional exceptions added by the Louisiana Legislature in recent years are again based upon relationships. They include the Corporation/Shareholder relationship, the Partner/Partnership relationship, without consideration of any possible dissolution, and the Limited Liability Company/Member relationship.

Because these agreements are in derogation of the common right to earn a living, Louisiana jurisprudence has strictly construed these exceptions to the general prohibition. To fall within these exceptions, most Louisiana courts have required non-compete agreements to list the area of prohibition by parishes, municipalities, or parts thereof, together with a term of no longer than two (2) years from the date of termination of the relationship.

While not specifically contained within the statute, various Louisiana courts have also required that a valid non-compete agreement accurately define the business in which the individual is prohibited from competing. Other Louisiana courts deny the need for this additional non-statutory-based requirement. If the business is defined within the agreement, however, the definition should be narrow and accurate.

The FTC’s proposed ban appears primarily concerned with the Employer/Employee relationship. It is not clear how the FTC’s proposed rule, if it takes effect, would deal with other relationships in Louisiana where non-compete agreements are allowed, including the partner/partnership relationship, the corporation/shareholder relationship, and the limited liability company/member relationships.

The proposed rule, if it becomes final, will have to survive serious legal challenges by the individual states and the business community before ever effecting the use of non-compete agreements nationwide. It is therefore suggested in today’s competitive marketplace that the use of non-compete agreements in Louisiana continue until further notice.