Restrictive Covenants in the Fifth Circuit

Restrictive covenants not to compete, or non-compete agreements, are one of a variety of tools companies use to protect their trade secrets and competitive advantage. However, whether a court will enforce a restrictive covenant varies widely across jurisdictions, including across states within the Fifth Circuit. For example, the Louisiana statute governing restrictive covenants applies a two-year durational limit, while Mississippi common law applies a more general ‘reasonable and specific’ standard to the duration and geographic scope of a restrictive covenant. In addition, Mississippi courts must balance the rights of the employer, the employee, and the public when enforcing restrictive covenants. buses. Commc’ns, Inc. v. Banks, 91 So. 3d 1, 11 (Miss. Ct. App. 2011), aff’d, 90 So. 3d 1221 (Miss. 2012).

Texas applies similar factors, but courts have “dispensed with one or more factors entirely” where the restrictive covenant was “reasonably narrow to protect a company’s business interest or goodwill.” Direct Biologics, LLC v. McQueen, No. 1:22-CV-381-SH, 2022 WL 1409984, at *9 (WD Tex. May 4, 2022). For example, in Totino v. Alexander & Associates, Inc., the court enforced a restrictive covenant even though it did not contain a geographic limitation. No. 01-97-01204-CV, 1998 WL 552818, at *3-4 (Tex. App. Aug. 20, 1998). The court reasoned that the restrictive covenant was reasonably narrow, despite no geographic limitation, because it was limited to communications with former clients with whom the former employees had worked. id.

state Law Governing Restrictive Covenants Restrictive Covenants Are Enforceable If the Covenant Is:
Louisiana La. Rev. Stats. Ann. § 23:921 Limited to a two-year duration; Includes a list of the geographic areas in which the former employee is restrained; Limited to prevent competition between the former employee and employer.
Mississippi See, eg, buses. Commc’ns, Inc. v. Banks, 91 So. 3d 1, 11 (Miss. Ct. App. 2011), aff’d, 90 So. 3d 1221 (Miss. 2012) Reasonable and specific in duration; Reasonable and specific in geographic scope.
Texas Tex. buses. & com. Code Ann. §§ 15.50, 15.52 Ancillary to or part of an otherwise enforceable agreement at the time the agreement is made; Reasonably limited as to time; Reasonably limited as to geographical area; Reasonably limited as to the scope of activity to be restrained. Limited to what is necessary to protect the employer’s goodwill or other business interests.

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