In a case handled by Deutsch Kerrigan--H2O Hair, Inc. v. Marquette, et al., 07-18 (La. App. 5 Cir. 5/15/07) 960 So.2d 250--a Non-Competition/Non-Solicitation Agreement was upheld for a parish where the employer solicited clients, even though the employer's headquarters and operations center was in a different parish. These agreements are often used by employers to bind key employees to the business and protect their client base. Specifically, Non-Competition/Non-Solicitation Agreements are designed to prevent former employees from taking the hard earned business and customers of the employer when someone leaves.
In this case, H2O Hair, Inc. ("H2O"), was granted a preliminary injunction, enjoining a former employee hairdresser from soliciting and servicing H2O clients in violation of her contractual agreement not to do so. The Agreement was to be in effect for two (2) years following her separation from H2O and was specifically limited to the parishes of Jefferson and Orleans. H2O's headquarters is in Jefferson but most of its customers come from other parishes, especially Orleans Parish. H2O advertises in Orleans and solicits customers in Orleans. The non-compete statute, however, only allows employers to restrict competition from former employees operating where the former employer is "carrying on a like business."
The Court of Appeals had to decide if H2O was "carrying on a like business" in Orleans Parish, such that the Non-Competition/Non-Solicitation Agreement could be upheld. The only business it did in Orleans Parish was to advertise there and solicit customers there.
The single most important asset for many businesses is its stock of customers. These Agreements protect the investment businesses make in each employee and allows them to provide many important and confidential materials to the employees. In enforcing the agreement, the Court said that carrying on a like business is not limited to only the location of the business, but also refers to where the clients are located. The Court further said that a company does not have to have a building in a parish in order to be carrying on like a business in that parish. The presence of customers and the solicitation of that business, therefore, was a sufficient basis to be "carrying on a like business" in that parish.
Consequently, the Court of Appeals upheld the non-solicitation agreement.
Written for The Legal Blueprint, 2007, Issue 3.
By: Frederick "Ted" Le Clercq