After a long hiatus, Georgia courts are once again cracking down on employee non-compete agreements and other restrictive covenants. These decisions deserve the attention of every Georgia employer who issues these agreements to their employees.
The Georgia Supreme Court and Court of Appeals have made three findings: (1) Employee non-solicitation provisions must contain geographic limitations. (2) Georgia courts will modify restrictive covenants only by “striking out” overbroad provisions. not by adding or changing its terms and conditions; and (3) Georgia courts will not enforce another state’s choice of law provisions to avoid these and other requirements if the agreements could not initially pass under Georgia law.
These decisions serve as a much-needed reminder that Georgia remains hostile to restrictive covenants on workers and that the 2011 state constitutional amendment allowing their enactment will be strictly interpreted.
Non-solicitation provisions for employees must be geographically limited
The Georgia Court of Appeals’ recent ruling that employee non-solicitation provisions must be geographically limited undermines almost all existing employee non-solicitation provisions. Lawyers and employers have long understood that non-solicitation provisions can be treated equally for employees and customers. That’s no longer true.
Well, while customer Non-solicitation provisions need not contain an express geographical limitation. Employees Non-solicitation clauses must contain an “explicit reference to the geographical area”. Consequently, these provisions need to be reviewed and possibly reformulated. In doing so, employers should be aware that if this geography is defined too broadly, Georgia courts will strike down the entire provision rather than restate it.
“Blue Penciling” is back
The Georgia Court of Appeals has made clear that courts cannot restate overly broad restrictive covenants. While you may edit out (or blue pen) certain offensive, overly broad language, you may not add or paraphrase words to correct an employer’s unreasonable restrictions. For example, Georgia courts will treat a non-compete agreement that lacks a time or geographic limitation or that sets an impermissible scope (e.g., four years or “worldwide”) as irredeemably overbroad and therefore unenforceable. In contrast, a non-compete clause with a geographic scope of “North America, but if it is found to be too broad, Georgia, and if it is still found to be too broad, Savannah” could theoretically survive a blue pencil review – if the court doing so would be inclined.
What is important is that this blue pencil declaration has an impact all restrictive employee covenants, including non-compete agreements, employee non-solicitation agreements, and customer non-solicitation agreements.
No choice of law
Finally, employers hoping to circumvent these restrictions by relying on another state’s law in a restrictive covenant are out of luck, as the Georgia Supreme Court has reaffirmed that Georgia courts must first determine whether the agreement is enforceable under Georgian law. Otherwise, Georgia law applies. In fact, a non-compete agreement that would be struck down under Georgia law cannot avoid this result by relying on another state’s law.
Key to take away
Taken together, these decisions re-emphasize Georgia’s century-old view that restrictive covenants are unfavorable general restraints of trade and may only be enforced if they pass the strict scrutiny of the courts. Therefore, employers employing employees in Georgia are strongly advised to consult with an employment counselor to determine whether the post-employment restrictions applicable to their employees are valid and, if not, have them revised and reissued promptly.