Georgia employers must act now as recent court decision potentially invalidates most employee non-solicitation agreements |  Fisher Phillips

The Georgia Court of Appeals just made it much more difficult for employers to enforce employee non-solicitation provisions that may require immediate action to protect your company's interests and protect the stability of your workforce. The appeals court's June 13 decision in North American Senior Benefits v. Wimmer found that an employee non-solicitation clause must have a territorial limitation to meet the requirements of Georgia's 2011 Restrictive Covenants Act (RCA). suffice. Because most traditional employee non-employment provisions do not contain such clauses, most of these restrictions are now unenforceable in Georgia. What do you need to know about this decision – and more importantly, what do you need to do to fix this problem?

Loophole in 2011 law opens door to current court decision

Traditionally, Georgia law has been permissive in its anti-employee assault provisions. Even in the pre-2011 Georgian common law regime, which was generally extremely hostile to restrictive covenants, anti-predatory restrictions were found in numerous cases to be subject to less scrutiny than non-compete or non-solicitation agreements.

The RCA greatly facilitated the enforcement of covenants, stating that “reasonable restrictive covenants in employment and commercial contracts serve the legitimate purpose of protecting legitimate business interests and creating an environment conducive to attracting commercial businesses to Georgia and maintaining existing businesses in Georgia Georgia favors “state.” However, the law did not specifically address restrictions on employee non-solicitation.

Court takes a hard line on restrictive agreements

The appeal court took up this omission. It noted that employee non-solicitation provisions restrict competition and that the law states that “no contractual provision 'restricting competition' may be enforced unless it is 'relative to time, geographical area.' and the scope of the prohibited activities.'” The restrictive non-solicitation agreement before us does not contain an expressly specified geographical area.”

The Court of Appeal further explained that the RCA exempts two types of provisions from the geographic restriction requirement—restrictions on solicitation and the use or disclosure of confidential information—but that these exemptions do not apply to non-employment provisions. Finally, the Court of Appeals took a narrow view of courts' authority to modify unenforceable agreements, holding that the trial court had no authority to add a territorial limitation to the agreement.

The bottom line for Georgia employers

The lesson for employers with operations in Georgia is clear: You must ensure that your employees sign new restrictive agreements that impose a geographic limitation on the non-solicitation of employees (or at least make changes that make this change to existing agreements).

This is not as difficult to implement in Georgia as it is in other states because Georgia does not require, as some other states do, that you provide new consideration for existing freelance employees (beyond continued employment) for signing a restrictive agreement. In simple terms, a Employers make signing a new agreement a condition of continued employment; There is no need to pay employees for new contracts.

Additionally, non-employment provisions have become increasingly important in recent years as retaining talent becomes increasingly important in a tight labor market. Litigation involving employee poaching – particularly mass raid cases where large numbers of employees move between competitors – is becoming more common, so it is critical to have enforceable anti-raiding provisions.

What's next?

It is possible that the Georgia legislature will amend the RCA to address the problem identified by the appeals court. It is also possible that the Georgia Supreme Court could overrule Wimmer or another appeals court could take a contrary opinion. It may be that the plaintiff in Wimmer did not make the right arguments about whether the RCA imposes territorial restrictions in the non-employment provisions.

However, you cannot expect any of these situations to occur. Prudent employers with operations in Georgia should consider amending their restrictive contractual agreements to include a territorial limitation in their anti-raid paragraphs to ensure they remain enforceable.