A recent Georgia Court of Appeals decision could impact your ability to enforce non-solicitation obligations against your former employees following separation.
Under the Georgia Restrictive Covenants Act (the “Act”), OCGA § 13-8-50 et seq., which governs non-compete and non-solicitation agreements for employees working in Georgia, a restrictive covenant is enforceable if it is “reasonable” with respect to Time, geographic area and scope of prohibited activities.” OCGA § 13-8-53(a). If a court finds that a restrictive covenant is unreasonable as to time, geographic area, or scope, the law allows the court to “blueprint” or modify the provision and “grant only such relief as is reasonably necessary.” “to protect such interest or interests.” “achieve to the greatest extent possible the original intent of the parties.” OCGA § 13-8-54(b).
With respect to contracts that prohibit advertising to a company's customers, the law does not require an express reference to a geographic area to be enforceable. Instead, any reference to a prohibition on solicitation is deemed reasonable and should be construed narrowly to apply only to those customers with whom the employee has had “substantial contact.” OCGA § 13-8-53(b). Therefore, for years, practitioners have been convinced that a geographical restriction was not necessary for a contract prohibiting the recruitment of a company's employees as long as it only prohibited the recruitment of persons with whom the former employee had material contact during his/her employment had a job in the company.
However, in a recent decision, North American Senior Benefits, LLC v. Wimmer, 2023 WL 3963931 (Ga. Ct. App. June 13, 2023), the Georgia Court of Appeals ruled otherwise. Specifically, the court held that an employee non-solicitation agreement that did not contain a geographic restriction was void and unenforceable under the law, and that the trial court had no authority to amend the restrictive covenant to add a geographic restriction. In its decision, the court noted that the law provides only two exceptions to the geographic restriction requirement: restrictions on solicitation and protection of trade secrets. Since recruiting employees after termination is not one of the enumerated exceptions, it was determined that a geographic limitation was required under the Act. Additionally, the court held that the power to “blue pen” or amend a restrictive covenant under the statute was limited to striking out offensive language, noting that the “blue pen” marks but does not write. Therefore, the trial court could not add a missing provision (e.g., a geographic area) to the agreement to make it enforceable.
What does this mean for your company?
Your company should review and evaluate its employee non-solicitation policies to ensure they contain an appropriate geographic limitation. If not, the agreements may not be enforceable under Georgia law and we recommend that you have your employees sign a new, revised employee non-solicitation agreement.
