Equalizing the Threat of Noncompete Agreements: Solutions Beyond Louisiana's Tangled Web of Nullity

Author:Kristen Amond
Position:J.D./D.C.L., 2016, Paul M. Hebert Law Center, Louisiana State University.
Pages:1235-1275
 
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Equalizing the Threat of Noncompete Agreements:
Solutions Beyond Louisiana’s Tangled Web of Nullity
TABLE OF CONTENTS
Introduction ................................................................................ 1236
I. Noncompete Agreements Throughout the United States
and Louisiana .............................................................................. 1241
A. Noncompete Agreements Throughout the United States ..... 1242
B. Noncompete Agreements in Louisiana ................................ 1243
1. Louisiana’s Oscillating History of Noncompete
Agreements .................................................................... 1244
2. Requirements of an Enforceable Noncompete
Agreement Under Section 23:921 ................................. 1248
II. The Doctrine of Nullity as Applied to Noncompete
Agreements ................................................................................. 1249
A. Dissolution and Damages: Louisiana Civil Code Article
2033 and Its Application to Noncompete Agreements ........ 1250
1. Application of Article 2033: Restoring a Party
through Damages ........................................................... 1251
2. Restoring the Employee Through Article 2033:
Kimball v. HEALTHCAREfirst, Inc. .............................. 1252
B. Reformation of Contractual Instruments .............................. 1254
1. Reformation of Noncompete Agreements Throughout
the United States ............................................................ 1254
2. Reforming Noncompete Agreements in Louisiana:
AMCOM of Louisiana v. Battson .................................. 1256
C. Lost in the Nebulous Web of Nullity ................................... 1258
III. Legal Problems Leading to Overused and Overly Broad
Noncompete Agreements ........................................................... 1259
A. Overly Broad Noncompete Agreements .............................. 1259
B. Overuse of Noncompete Agreements .................................. 1260
1. Protectable Interest Requirement in Other
Jurisdictions ................................................................... 1260
2. Louisiana’s Battle with Certainty and Fairness ............. 1262
IV. Alternative Solutions to the Overly Broad and Overused
Noncompete Agreements ........................................................... 1263
A. A Legislative Solution: Overhaul Louisiana’s
Noncompete Law ................................................................. 1263
1236 LOUISIANA LAW REVIEW [Vol. 76
1. Disincentivize Overbreadth of Noncompete
Agreements: Eliminate Reformation ............................. 1264
2. Curtail the Overuse of Noncompete Agreements:
Require a Protectable Interest ........................................ 1264
B. A Judicial Solution: Arming Employees and Employers
with the Counterweight of Intentional Interference with
Contractual Relations ........................................................... 1265
1. Intentional Interference with Contractual Relations
in Other Jurisdictions ..................................................... 1266
2. Intentional Interference with Contractual Relations in
Louisiana ....................................................................... 1267
3. Adopting Tortious Interference in the Employment
Context in Louisiana ...................................................... 1269
C. The Not-So-Magic Formula ................................................. 1273
Conclusion .................................................................................. 1274
INTRODUCTION
Noncompete agreements, once used infrequently and limited to highly
specialized industries, are becoming ubiquitous in employment contracts.1
These agreements are frequently overly broad and often restrict employees
who have no specialized knowledge or training and who pose no threat to
an employer’s competitive advantage. One such case is that of Catherine
Kimball. HEALTHCAREfirst (“HCF”) offered Catherine Kimball
employment as a consultant and salesperson in charge of providing
technology services to healthcare agencies.2 Before Kimball accepted the
Copyright 2016, by KRISTEN AMOND.
1. See Greg T. Lembrich, Note, Garden Leave: A Possible Solution to the
Uncertain Enforceability of Restrictive Employment Covenants, 102 COLUM. L.
REV. 2291, 2297 (2002) (“Given the degree of protection that restrictive
covenants can offer, some commentators have suggested that employers should
routinely include them in their employees’ contracts, even if they may not be
necessary.”).
2. HEALTHCAREfirst is a national company that provides web-based home
health and hospice services to caregivers. About Us, HEALTHCAREFIRST,
http://w2.healthcarefirst.com/who-we-are/ (last visited Mar. 9, 2016). The company
is based in Missouri, but has an office in Baton Rouge, Louisiana. Contact
HEALTHCAREfirst, HEALTHCAREFIRST, http://w2.healthcarefirst.com/contact-
us/ (last visited Mar. 9, 2016). Catherine Kimball’s attorney, Amy Newsom,
provided all of the information on Kimball’s journey through litigation. Interview
with Amy Newsom, Newsom Law Firm, in Baton Rouge, La. (Sept. 18, 2014).
Litigation arose in the Middle District of Louisiana. Kimball v.
2016] COMMENT 1237
position, but after she had resigned from her previous employment, HCF
informed her that she would be required to sign a noncompete agreement.3
Because Kimball had already resigned from her previous employment, she
felt that she had no option but to sign the noncompete agreement.
HCF, a national company that used both telephone and web-based
technology, allowed Kimball to work from her home in Baton Rouge,
Louisiana. Kimball’s service territory changed 13 times during her three
years of employment, allowing Kimball to service agencies in all 50 states
during her employment with HCF.4 Despite working for HCF for years,
the company laid off Kimball, forcing her to seek new employment.5
Kimball applied to work at a California company that did nearly
identical work to HCF and would allow her to work from her home in
Louisiana. The California employer was ready to offer Kimball a job when
she told the company that she had signed a noncompete agreement with
HCF. The company refused to hire Kimball unless HCF released her from
the noncompete agreement or a court invalidated the agreement. HCF
refused to release Kimball from the agreement, and as a result, the
California employer declined to offer Kimball employment.
Because of the restrictive noncompete agreement, Kimball was left
unemployed, and she had few options for future employment. The
noncompete agreement restricted employees from working in every state
in the United States, Guam, and Puerto Rico6 and thus was geographically
overbroad under Louisiana law.7 Only after Kimball filed suit, did HCF
concede that the noncompete agreement was overly broad and seek
reformation of the agreement to make it enforceable.8
HCF’s concession, however, arrived too late. By the time the court
declared Kimball’s noncompete agreement invalid, the California
company had rescinded the job offer.9 Throughout the litigation
HEALTHCAREfirst, Inc., No. 12–395, 2013 WL 4782139 (M.D. La. Sept. 5,
2013).
3. Interview with Amy Newsom, supra note 2.
4. Because Kimball worked in each state, HCF’s noncompete agreement,
which forbade ex-employees from working in any place where they did work for
HCF, effectively prohibited her from competing in any state in the nation.
5. Interview with Amy Newsom, supra note 2.
6. Memorandum in Support of Motion for Summary Judgment at 5, Kimball v.
HEALTHCAREfirst, Inc., No. 12–395 (E.D. La. Sept. 4, 2012), 2012 WL 6197360.
7. The agreement violated Louisiana law because it did not restrict
competition to the parishes or municipalities in which the employer did business.
LA. REV. STAT. ANN. § 23:921 (Supp. 2015).
8. Kimball v. HEALTHCAREfirst, Inc., No. 12–395, 2013 WL 4782139, at
*2 (M.D. La. Sept. 5, 2013).
9. Interview with Amy Newsom, supra note 2.

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