Georgia employers are navigating evolving case law regarding restrictive covenants

At both the state and federal levels, we are seeing new attacks on employers' ability to impose restrictive covenants in both employment contracts and independent contractor contracts. For example, the Federal Trade Commission has proposed a formal ban on all non-compete agreements; a vote on this proposal is currently scheduled for April.

Additionally, a group of bipartisan U.S. Senators have introduced the Workforce Mobility Act of 2023, which, if passed, would also ban the use of non-compete provisions on a statewide basis.

We are also seeing changes in the application of non-compete provisions and other restrictive covenants at the national level. As of July 1, Minnesota, along with California, North Dakota and Oklahoma, prohibit the use of non-compete provisions against employees or independent contractors except in very limited circumstances.

Additionally, based on recent case law, we believe there is a strong likelihood that Georgia will require employers to modify their non-solicitation provisions for employees and contractors. Be enforceable under Georgia law in the June decision in North American Senior Benefits v.

Historically, Georgia law has been more permissive regarding non-solicitation provisions for employees and contractors. Such provisions are not expressly addressed in the Restrictive Covenants Act (RCA) 2011, a potential omission which the Court of Appeal has now taken up.

Specifically, the Court of Appeal held that the RCA has only two exceptions to the geographic area requirement: (1) non-solicitation provisions and (2) non-disclosure provisions of confidential information.

We are currently following this case to see what might happen next. It is possible that the Georgia legislature decides to amend the RCA to address this issue, and it is also possible that the Georgia Supreme Court decides to override the holding entirely.

Given the rapidly changing landscape, it will be critical that employers monitor proposed and upcoming legislation, as well as FTC regulations and case law. It may also be advisable to conduct an up-to-date review of your employees' and independent contractors' agreements, not only to ensure that your agreements remain enforceable and compliant, but also because keeping up with the changes can quickly become a time-consuming process .

Another thing employers might consider would be to preemptively remove non-compete provisions from their agreements entirely, both because it helps employers comply with state laws and because it can actually allow companies to compete with other employers who may do the same, stay competitive.

For employers who choose this approach, it is important to remember that they continue to enjoy protection through the use of other restrictive covenants, such as confidentiality of confidential information.

Finally, these state law changes also serve as a good reminder to multistate employers that restrictive covenants should be tailored specifically to the law of the state in which each employee lives and/or works.

Ellenor Stone is a partner in the employment practice at Morris, Manning & Martin and Ashton King is an associate in the firm's employment practice. Both are based in Atlanta.