As outlined in a previous Milling blog post, Louisiana non-compete agreements are enforceable only if they meet strict statutory criteria. Recent amendments to the statute governing these criteria, effective January 1, 2025, impose additional restrictions on physicians’ non-compete agreements. Although the new law generally applies only to agreements executed after this date, it also impacts preexisting contracts by introducing expiration dates and restricting their geographical scope. This post provides a brief overview of the amendment’s application to new contracts and its effect on preexisting agreements.
CONTRACTS ENTERED INTO AFTER JANUARY 1, 2025
- Is my contract covered by the new law?
If you enter into a contract with a non-competition clause after January 1, 2025, determining whether the new law affects your non-compete depends on your employer or the entity with whom you are under contract.
If you are a physician employed by or under contract with a rural hospital or a federally qualified healthcare center operating in a rural parish at the time of your hire, the new law likely does not apply to your contract. Instead, your agreement remains subject to the general provisions governing non-physician individuals.
However, if you are not employed by or under contract with a rural hospital or a federally qualified healthcare center, the new law likely applies to you.
- Does my specialty matter?
Generally, no. While the new law distinguishes between “primary care physicians” and all other physicians, its provisions are the same for all, except for the length of the “burn down” period, as explained below. For reference, “primary care physicians” are those who predominantly practice general family medicine, general internal medicine, general pediatrics, general obstetrics, or general gynecology.
- What is the “burn down” period?
The “burn down” period, also known as the “burn off” provision, is an expiration date of your non-compete. It starts on the effective date of your initial agreement with your employer and lasts for three (3) years if you are a “primary care physician” or five (5) years if you are any other physician. After the “burn down” period, your non-compete sunsets and cannot be enforced or renewed. If you sign a new contract with the same employer, it may not contain a non-compete provision.
- What are the geographic limits of my non-compete?
Your employer may prohibit you from competing in only three (3) parishes: the parish where your “principal” practice is located and no more than two (2) contiguous parishes in which your employer carries on a like business. For the non-compete agreement to be valid, it must specifically name all of those parishes.
- What are the time limits of my non-compete?
The non-compete prohibition can last a maximum of two (2) years from the termination of your employment. Note that this time limitation is different from the “burn down” period, which begins on the first day of your employment. Here is an example to illustrate the difference:
If you are a primary care physician hired on January 7, 2025, your non-compete remains in effect for three years, expiring on January 7, 2028. If you resign on January 8, 2028, your employer cannot enforce the non-compete because it has already expired. However, if you resign on January 6, 2028, your employer may prohibit you from competing for up to two years, until January 6, 2030.
- Can my employer fire me and enforce the non-compete?
No. The new law specifically states that you can only be prohibited from competing with your former employer if you terminate your employment before the expiration of the “burn down” period. Referring back to the example above, if your employer terminates you at any time between January 7, 2025, and January 7, 2028, you are free to compete.
CONTRACTS ENTERED INTO BEFORE JANUARY 1, 2025
As noted above, even though the new law generally does not apply to preexisting agreements—those entered into before January 1, 2025—it does impact them in two significant ways: by establishing “burn down” periods and restricting their geographical scope. If you are not employed by or under contract with a rural hospital or a federally qualified healthcare center and you have a preexisting contract with a non-competition clause, the clause has been affected as follows:
- “Burning down” period:
Your non-compete began “burning down” on January 1, 2025. This means that if you were hired before that date, your non-compete will expire on January 1, 2028, if you are a primary care physician, or on January 1, 2030, if you are any other physician.
- Geographical scope restriction:
Your employer may now enforce your non-compete only within three (3) parishes: the parish where your principal practice is located and two (2) contiguous parishes where the employer operates a similar business. Under the previous law, there were no limits on the number of parishes, no requirement for them to be adjacent, and employers could even designate municipalities or parts thereof as restricted areas. As of January 1, 2025, enforcement is now limited to three parishes. If you signed a contract years ago, it is worth taking a look at your non-compete agreement –it may have just shrunk.
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