Opinion ID: 1860745
Heading Depth: 1
Heading Rank: 5

Heading: Interpretation of Contractual language in light of La.Rev.Stat. 23:921

Text: A noncompetition agreement is a contract between the parties and should be construed using general rules of construction of contracts provided in the Louisiana Civil Code. The interpretation of a contract is the determination of the common intent of the parties with courts giving the contractual words their generally prevailing meaning unless the words have acquired a technical meaning. LA. CIV.CODE arts. 2045, 2047; see e.g. Louisiana Ins. Guar. Ass'n v. Interstate Fire & Casualty Co., 93-0911, p. 5 (La.1994), 630 So.2d 759, 763. The purpose of noncompetition agreements is to protect business from competitive disadvantage by an employee exploiting skills, knowledge or information acquired while employed by the former employer. However, an employee has a right to ply his trade or profession to sustain his livelihood. Additionally, the employer is typically the drafter of the instrument, which under contract interpretation of ambiguous terms requires construction against the contract's drafter. See LA. CIV.CODE art. 2056. Thus, in accord with Louisiana's strong public policy against restraints on trade, ambiguous provisions must be strictly construed in favor of the employee. Bond argues that because La.Rev. Stat. § 23:921(C) provides a narrow exception that must be strictly complied with, SWAT's Agreement is overbroad. However, the Agreement specifies that Bond was prohibited from directly or indirectly competing with SWAT in specified parishes for a period of two years. The portion of the clause that prevents Bond from serving as an officer, employee, director, agent or consultant of any business, which is in direct or indirect competition with SWAT... fits within the exception under the statute that allows employers to prohibit an employee from carrying on or engaging in a business similar to the employer. Under a plain reading of the contract provision, Bond is precluded from working as an employee for a business in competition with SWAT. [3] The question then becomes whether a noncompetition agreement must mirror the words of the statute exactly to be effective, as the agreement did in Scariano Bros.; or whether the prohibition from engaging in direct or indirect competition with the employer is interpretatively the same as carrying on or engaging in a business similar to the employer, as the third circuit found in Moreno. Under a logical interpretation of the statute, similar businesses would likely be in competition with one another for the same customers and resources. However, in some circumstances, using a plain meaning interpretation of the statute, two businesses could be similar without being in competition. For example, a construction company that specialized in constructing commercial office buildings would arguably not be a competitor of a company constructing residential homes; however, both types of construction companies would be similar. Thus, the fact that the businesses are similar is not dispositive on the issue of whether the businesses are competitors; although the converse is presumably true, i.e., dissimilar businesses are presumptively invalid under the plain language of the statute. In light of public policy, and the strict construction that must used be against SWAT as the drafter of the agreement, a more workable approach would consider whether both the former and the new employer must be competitive businesses to satisfy both the contract and the statute. Thus, the first question that must be resolved is whether NRS and SWAT are competitors. According to Bond, NRS does all types of contracting and construction work, including insurance restoration work, which constitutes 20-25% of NRS construction work. Bond defined insurance restoration work as remodeling where we go in and take old houses or new houses and redo them ... restore them to what people want, including work after fire or storm damage, including emergency repair during normal work hours. Bond distinguishes SWAT from NRS based on the emergency repair work that SWAT performs beyond normal working hours. Bond's distinction does not establish a difference cognizable under the statute or the contract. Thus, the two business are not only similar, but also competitors.