At the Breaking Point: Adapting Louisiana Employment Noncompete Law to the Information Age

• Author: Jacob Ecker
• Position: J.D./D.C.L., 2015, Paul M. Hebert Law Center, Louisiana State University.
• Pages: 1317-1362

At the Breaking Point: Adapting Louisiana

Employment Noncompete Law to the Information

Age

Introduction ....................................................................... 1318

I. Same Point of Departure, Different End Result—The

Moving Target of Louisiana Noncompete Policy ............. 1321

A. General Trends in Noncompete Enforceability and

the Competing Interests of Enforceability ....................1322

B. Louisiana’s Legal Tennis Match Between the

Courts and the Legislature on the Extent of

Noncompete Enforceability ..........................................1325

1. The Legislature Serves the Ball—The 1962

Amendment ........................................................... 1326

2. The Judiciary Returns the Ball—Orkin

Exterminating Co. v. Foti ...................................... 1327

3. The Legislature Forehands to the Elbow—The

1989 Amendment .................................................. 1327

4. The Judiciary Lobs a Return—SWAT 24

Shreveport Bossier, Inc. v. Bond ........................... 1328

5. The Legislature Rushes the Net and Slams the

Ball—The 2003 Amendment ................................ 1330

6. The Judiciary Misses the Return—Possible

Softening of Louisiana’s Public Policy Against

Noncompetes ......................................................... 1331

II. Time, Place, and Manner—The Requirements for

Enforcing a Noncompete in Louisiana.............................. 1333

A. Time Limit—Two-Year Restraint ................................1334

B. Geographic Listing Requirement—Specifying

Parishes, Municipalities, or Parts Thereof ....................1334

1. Generally—Listing Political Subdivisions

Where Business Is Carried On .............................. 1335

2. Caveat—Reforming Facially Overbroad

Agreements ............................................................ 1336

C. Competition—How Much Is Enough to Carry

on a Like Business Therein? .........................................1339

1318 LOUISIANA LAW REVIEW [Vol. 75

III. Square Peg in a Round Hole—Flaws in Louisiana’s

Approach as Applied to Internet-Intensive Businesses..... 1345

A. The Clock Stopped in 1962, But Time Does Not

Stand Still on the Internet .............................................1345

B. Carrying on and Engaging in Ambiguity—The

Competition Requirement ............................................1347

IV. A Coordinated Effort—Louisiana’s Solution for

the New Economy ....................................................... 1351

A. Judicial Solution to Ambiguity in the Competition

Requirement—Adopting an Impact Analysis ..............1351

B. Legislative Solution to Temporal Overreaching ..........1358

Conclusion ........................................................................ 1362

INTRODUCTION

Imagine a graphic designer named Charlie who works at a

design firm based in Baton Rouge, Louisiana.1 On his first day of

work, Charlie signs some paperwork, including an agreement not

to compete. The noncompetition agreement (noncompete) provides

that if Charlie separates from the firm, he must refrain from

engaging in the business of graphic design within the parishes of

East Baton Rouge, West Baton Rouge, Livingston, and Ascension

for a period of two years. During the course of his employment,

Charlie designs many graphics for the firm’s customers who

submit online orders via the firm’s website. Two years later,

however, the firm decides that it needs to lay off Charlie due to

cutbacks.

Though he is devastated, Charlie makes every effort to stay on

his feet. He launches his own solo graphic design business, which

he operates from his home in East Baton Rouge. His business’s

website allows customers to submit online orders in exchange for

Charlie’s graphic design services. So far, Charlie’s only customers

are located beyond the geographic scope of the noncompete in

Calcasieu Parish, Louisiana; Houston, Texas; and Nashville,

Tennessee. After learning of Charlie’s website, however, his former

employer files suit in East Baton Rouge Parish seeking to enforce

the noncompete. If the employer’s suit is successful, Charlie would

not be able to design graphics for anyone from his home in Baton

Copyright 2015, by JACOB ECKER.

1. This hypothetical is e ntirely fictional.

2015] COMMENT 1319

Rouge, regardless of where his customers are located. Additionally,

Charlie would be prohibited from doing so for two years.2 As a

result of the noncompete, to earn a living he would be forced to

either leave the restricted area if he wants to continue working as a

graphic designer or take a job in another field outside of his

expertise.

Current Louisiana law in this area has two fundamental

problems. First, there is very little clarity on whether Charlie ever

actually breached the noncompete by taking on customers from

outside of the restricted parishes. This problem is caused by the

underdevelopment of the requisites for breaching an agreement by

competing with the former employer for customers or other business.

Essentially, the law focuses on geographic limitations to the exclusion

of examining the actual competition involved in the case, even in

situations where geographic boundaries are of little importance.3

Additionally, reported appellate litigation has yet to squarely face a

situation involving Internet competition. Second, assuming Charlie’s

conduct does constitute a breach of the noncompete, the agreement

would enjoin Charlie for two full years, which is far longer than

necessary today given the modern reformulation of “knowledge

assets” and the rise of the Internet.4

These two problems—(1) ambiguity in the jurisprudence as to

what activity constitutes competition, and (2) inequity resulting

from enforcing restraints on ex-employees for two full years when

provided by the agreement5—though they existed prior to the rise

2. He may face the additional problem of losing currency in relevant software

after returning to the market two years later. See Creative Cloud/Common

Questions, ADOBE.COM, https://helpx.adobe.com/creative-cloud/faq.html, archived

at https://perma.cc/RKB5-D4BY (last visited Feb. 11, 2015) (noting changes in

design software). Many industries face similar continuous training requirements.

3. See Norman D. Bishara & David Orozco, Using the Resource-Based

Theory To Determine Covenant Not To Compete Legitimacy, 87 IND. L.J. 979,

980, 982 (2012) (arguing that most states have failed to take into account “the

new concepts of boundary-less commerce and knowledge assets” in formulating

noncompete law).

4. See id. at 982; Richard R. Mann & Barry S. Roberts, Cyberlaw: A Brave

New World, 106 DICK. L. REV. 305, 339 (2011). To the extent that the two-year

restriction’s usefulness is diminished, the concern for preventing a person from

engaging in the trade that person has chosen to pursue becomes more

problematic. See Harlan M. Blake, Employee Agreements Not to Compete, 73

HARV. L. REV. 625, 686–87 (1960) (discussing the balancing of employer and

employee interests to “maximiz[e] the social values”).

5. This Comment does not argue that two years is inequitable in all cases.

There are a growing number of situations, however, where a shorter time is

justified given the fast-paced nature of many businesses today. See Katherine

V.W. Stone, Knowledge at Work: Disputes Over the Ownership of Human

Capital in the Changing Workplace, 34 CONN. L. REV. 721, 732 (2002) (noting