Orkin Exterminating Company v. Foti

Supreme Court of Louisiana
302 So.2d 593 (1974)

ELI5:

Sections

Rule of Law:

Under Louisiana statute La.R.S. 23:921, a non-competition agreement is void as against public policy unless the employer has invested substantial funds in special training for the employee or in advertising that explicitly promotes the employee's connection to the business.

Facts:

James Foti was employed by Orkin Exterminating Company for approximately five years beginning in 1968.
Foti signed an employment contract in 1972 that included a clause prohibiting him from engaging in the pest control business for two years in specific Louisiana cities after his employment ended.
During Foti's employment, Orkin provided him with access to manuals, technical bulletins, and on-the-job supervision.
Orkin incurred specific expenses for Foti's training, including one-day service schools, a leadership conference, and a $261.50 expense for a training school in Atlanta in 1970.
Foti terminated his employment with Orkin.
Immediately after leaving, Foti established his own pest control business in Opelousas, Louisiana, operating within the territory restricted by his contract.

Procedural Posture:

Orkin sued Foti in the trial court seeking an injunction to enforce the non-competition provisions of his employment contract.
The trial court granted a limited injunction preventing Foti from soliciting former customers but denied the request to stop him from working in the pest control business entirely.
Orkin appealed the decision to the Louisiana Court of Appeal, Third Circuit.
The Court of Appeal affirmed the trial court's judgment.
Orkin filed a writ of certiorari with the Supreme Court of Louisiana.

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Issue:

Does a statutory exception allowing non-competition agreements where an employer incurs training expenses apply to normal administrative costs and on-the-job training, or does it require substantial, specialized investment?

Opinions:

Majority - Justice Tate

No, normal administrative expenses and on-the-job training are insufficient to validate a non-competition agreement. The court reasoned that the public policy of Louisiana strongly disfavors non-competition agreements because they restrict an individual's right to work and rely on a disparity in bargaining power. The 1962 statutory amendment, which allowed an exception for employers who incur training or advertising expenses, must be strictly construed to avoid repealing the general prohibition. The court adopted the rationale of National Motor Club v. Conque, holding that the exception applies only to substantial investments in special training or advertising of the employee. In this case, Foti's training was routine, and the $261.50 spent years prior was insubstantial and had already benefited Orkin during Foti's employment. Therefore, the non-compete clause was unenforceable.

Concurring - Justice Summers

Yes, the result is correct. Justice Summers concurred in the result without providing a separate written opinion.

Analysis:

This decision is a landmark ruling in Louisiana employment law because it resolved a split between intermediate appellate courts regarding non-compete agreements. By rejecting the Aetna Finance Co. v. Adams line of cases—which had allowed virtually any employer expense to validate a non-compete—the Supreme Court reinforced a strong public policy favoring free enterprise and employee mobility. The ruling ensures that the statutory exception for 'training expenses' cannot be used as a loophole for employers to restrict ordinary employees who have merely received standard on-the-job instruction. It established a high threshold for employers, requiring them to prove they made a significant, specialized investment in the employee before they can restrict that employee's future commercial activities.

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