Georgia employers must act now as the recent court ruling potentially invalidates most employee non-solicitations

The Georgia Court of Appeals just made it significantly more difficult for employers to enforce non-solicitation provisions that may require immediate action to protect your company’s interests and protect the stability of your workforce. The June 13 appeals court decision in North American Senior Benefits v. Wimmer found that a non-solicitation clause for employees must have a territorial limitation in order to meet the requirements of Georgia’s Restrictive Covenants Act (RCA) of 2011 suffice. Because most traditional non-employment regulations 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 issue?

Loophole in 2011 law opens door to current court decision

Traditionally, Georgia law has been permissive on worker mugging provisions. Even in the pre-2011 Georgian common law regime, which was generally extremely hostile to restrictive agreements, it was found in numerous cases that anti-robbery restrictions were subject to less scrutiny than non-compete or non-solicitation of customers.

The RCA greatly facilitated the enforcement of agreements, noting 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 Favors.” State.” However, the law did not specifically address non-solicitation restrictions on workers.

Court takes a hard line on restrictive agreements

The Court of Appeals upheld that omission. It found that non-solicitation provisions restrict competition and that the law states that “no contractual provision ‘restricting competition’ may be enforced unless it is ‘as to time, geographic area and commensurate with the scope of the prohibited activities’.” The restrictive non-solicitation agreement in our possession does not contain a specifically identified geographic area.”

The Court of Appeals further stated that the RCA exempted two types of provisions from the geographic restriction requirement — restrictions on soliciting clients and the use or disclosure of confidential information — but that those exemptions did not apply to non-employment provisions. Finally, the Court of Appeal took a narrow view of the courts’ power to amend unenforceable agreements, ruling that the trial court had no authority to add a territorial restriction to the agreement.

Earnings for Georgia Employers

The lesson for employers with offices in Georgia is clear: You must have your employees sign new restrictive non-solicitation agreements (or at least make changes that cause that change to existing agreements) that include a geographic restriction on the non-solicitation of employees.

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

Additionally, non-hire regulations have become increasingly important in recent years as talent retention becomes more important in a tight job market. Litigation involving poaching of employees – particularly mass search cases involving large numbers of employees moving between competitors – is more common, so having enforceable anti-search provisions is critical.

What’s next?

It is possible that the Georgian legislature will amend the RCA to solve the problem identified by the Court of Appeal. It is also possible that the Georgia Supreme Court could overrule Wimmer, or another appellate court could hold a contrary opinion. The plaintiff in Wimmer may not have made the right arguments as to whether the RCA imposes territorial restrictions in the non-employment provisions.

However, you cannot expect any of these situations to occur. Prudent employers with offices in Georgia should consider changing their restrictive contract covenants to include a territorial restriction in their anti-raid paragraphs to ensure they remain enforceable.

Fisher Phillips will continue to monitor the situation and provide updates as appropriate. Be sure to subscribe to the Fisher Phillips Insight System for the most up-to-date information. If you have additional questions, consult your Fisher Phillips attorney, the author of this finding, any attorney in our Atlanta office, or an attorney in our employee deficit and trade secrets practice group.