introduction
decision
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introduction
Prior to the passage of Georgia’s Restrictive Covenant Act (RCA) in May 2011, the Georgian courts uniformly declared the non-compete provisions void and unenforceable in the employer-employee context “in any capacity”. Non-compete provisions “in any capacity” prohibit an employee from working for a competitor in any capacity and are not limited to the types of duties that the employee has performed for his current employer. Former Georgia common law did not permit a court to revise an otherwise invalid and unenforceable provision to render it enforceable.
However, the RCA expressly permits—but does not require—the court to “modify” an overly broad non-compete provision in order to make it enforceable. Since the passage of the RCA, there have been a number of instances where attempts have been made to define what “modify” means under the RCA.
decision
Against this background, in December 2022, a federal court in the Southern District of Georgia heard AmSpec, LLC v. Calhoun et al. with a non-compete provision that said, among other things, that the employee could not “employ as an employee, own, operate” work for “a company engaged in the same or similar business as AmSpec” where they “make a contribution.”[d their] knowledge” to this competitive company.
After a long discussion about what “Post [their] knowledge”, the court went over to the “caretaker rule” – namely to the employee’s argument that the provision as amended “prohibited the employee from any activity [for a competitor] . . . even if the work is not competitive [AmSpec’s] companies – including, for example, work as a secretary or caretaker”. The court agreed that it was a “in every capacity”
Citing a 2022 Georgia Court of Appeals decision, Burbach v. Motorsports of Conyers, LLC, the AmSpec court then ruled that non-competition clauses are invalid “in every capacity” and unenforceable. The court then exercised its discretion to refuse to amend the agreement to make it enforceable. In doing so, it argued that AmSpec was not proposing a narrower interpretation of the non-competition clause that would restrict prohibiting the employee from performing services similar to those they were performing on AmSpec’s behalf, and therefore would not offer narrower language for AmSpec.
comment
The Burbach decision (on which the AmSpec ruling was based) complied with Georgia common law, which predated the RCA’s enactment. On December 20, 2022, the Georgia Supreme Court agreed to an appeal of the Burbach decision.
Under AmSpec and Burbach — at least pending appeal — companies should review their restrictive Georgia covenant agreements and ensure that any non-compete provisions include, among other things, a limitation on the types of duties that are prohibited for an employee to act on behalf of a competitor.
For more information on this subject, please email Jeffrey Mokotoff at FordHarrison ([email protected]). The FordHarrison website can be accessed at www.fordharrison.com
