Updated December 20, 2023: The Supreme Court of Georgia has agreed to review this case.
* * *
The Georgia Court of Appeals recently provided important clarifications regarding the requirements for non-employment agreements under Georgia's Restrictive Covenants Act of 2011. In North American Senior Benefits, LLC v. Wimmer, 2023 WL 3963931 (Ga Ct. App. June 12, 2023), the court held that an employee non-solicitation clause must contain an express geographic limitation to be enforceable. The decision also explained that while courts have some discretion to “limit/weaken” restrictive covenants to bring them into compliance with Georgia law, a court may not add a geographic restriction to a document in which this essential term is missing.
The Georgia Court of Appeals decision
Georgia's Restrictive Covenants Act requires restrictive covenants to be “reasonable in terms of the time, geographic area, and scope of the prohibited activities.” Some Georgia trial courts had already held that this language required an express geographic limitation in employee non-solicitation provisions, but no Georgia appeals court had previously addressed this issue.
In this case, the plaintiff, an insurance distribution company, sued two former independent brokers for breach of their brokerage agreements. These contracts contained a non-solicitation clause that prohibited the representatives from soliciting the company's employees, agents or independent contractors for two years after their termination. The plaintiff alleged that the agents violated this agreement by poaching their employees.
In 2022, Judge Walter W. Davis of the Georgia State-wide Business Court refused to enforce the employee post-employment non-solicitation provision because it was unenforceable under Georgia's Restrictive Covenants Act because it contained no geographic limitation . Judge Davis also declined to “blue pen” the agreement to bring it into compliance with the State of Georgia’s Restrictive Covenant Act. Judge Davis opined that blue-penciling the provision “would materially alter the limitation in a manner that goes beyond merely limiting or severing impermissible language or terms.” The court dismissed the plaintiff's claims in connection with the representatives' alleged violation of the non-solicitation clause for employees.
The NASB appealed, arguing that the business court should have “blueprinted” the provision. On June 13, 2023, the Georgia Court of Appeals, in a split decision, affirmed Judge Davis' decision. The Georgia Court of Appeals agreed that Georgia's Restrictive Covenants Act requires that employee non-solicitation provisions contain an express territorial limitation and that a court may not write in that essential term. The court found that the geographical component should be “interpreted leniently,” but it must be present. Without a geographic restriction, the court said, an employee non-solicitation clause would be completely invalid and unenforceable.
What does this mean for employers?
Although it is possible that the Georgia Supreme Court will overrule Wimmer or that another appellate body will make a contrary decision, the safe course for employers at this time is to incorporate a geographic restriction into the non-employment provisions of the Restrictive Covenants Act. Employers should also consider amending existing non-solicitation provisions for employees that do not have a territorial restriction. In the current labor market, employers are increasingly feeling the need to enforce such regulations. Unless Georgia courts modify employee non-solicitation provisions where doing so would require the addition of the essential geographic term, a Georgia employer has little to gain from allowing such unenforceable provisions to remain in effect.
Georgia's case law regarding restrictive post-employment covenants is complex and many areas leave room for interpretation or require further guidance. Employers should seek legal advice on how Georgia law applies to their specific circumstances.
