Georgia’s Restrictive Covenant Act (OCGA 13-8-50 et seq.) (“RCA”) came into effect in May 2011 and applied to all agreements concluded on or after May 11, 2011 (“Business Court”) began with the hearing of Cases that included restrictive agreements, among other things. On March 5, 2021, the commercial court in the Martin v. Hauser, Inc. issued its 2014 restrictive covenant decision that included non-solicitation and non-recruitment provisions. Hauser is an insurance and service brokerage company. Martin worked for Hauser in Georgia, initially (when executing the contract) as a team leader and eventually as executive vice president and managing director of Hauser’s Risk Advisory Practice (where he was the company’s third senior). Ultimately, Martin decided to leave and filed a declaratory judgment asking the court to declare the unsolicited provisions of the agreement unenforceable.
In the drafted version, the agreement prevented Martin from asking Hauser customers who were Hauser Hauser customers in the last 18 months of his employment to change their insurance company or another company for a period of three years after the end of the employment relationship Change or relocate companies. The commercial court ruled that non-solicitation of customers was unenforceable, but ruled that it would change the provision to make it enforceable. It recognized that, first, under OCGA 13-8-57 (b) of the Act, any limitation of more than two years would be deemed inappropriate. However, applying the “amendment provision” of the law, the court changed the time limit to a one-year limit after termination of the employment relationship. It also used its amendment powers and OCGA 13-8-53 (b) to restrict the restriction to those customers with whom Martin had material contact. Finally, it restricted the non-solicitation so that it was only available to current customers (i.e. to customers who were customers at the time of termination by Martin Hauser) and not to former customers who may not be existing customers of Hauser at the time of termination, applies.
Regarding the failure to hire workers, the court referred to the Belt Power Court’s finding that the law applies to these provisions. The provision at issue prevented Martin for a period of three years after the termination of the employment relationship from in any way causing an employee or other agent to terminate his connection with such a company or to intervene in any way in the relationship between Hauser and the employee . However, the economic court refused to change the hiring ban, as it had to “incorporate new and essential terms” – for which employees it could not advertise. Because of these “opaque” descriptions, the commercial court came to the conclusion that it could not be saved and accordingly considered it to be unenforceable.
This decision underscores the uncertainty in Georgia over restrictive contract disputes, both in terms of what a court can do in amending an otherwise overly broad non-compete clause, and in terms of determining (under Belt Power) at least that court, that a non-recruitment provision is governed by the law (as there is no provision in the law that specifically refers to a non-employment provision). As more practitioners bring restrictive contract cases to the Georgia courts, we see some unique developments in this area of law.
Also note that the Georgia Supreme Court approved new rules for the commercial court on May 13, 2021. The new rules will come into force on August 1, 2021. Before the new rules of the commercial court were passed, the commercial court could only decide on cases with the consent of both parties. As of August 1st, there is no need for approval. According to the new rules, a plaintiff can file a suit with the commercial court even if the defendant does not agree. However, defendants can object to the action before the commercial court with a “jurisdiction complaint”. In addition, the parties can agree on a choice of jurisdiction in an agreement (e.g. a restrictive covenant agreement), which the commercial court as the dispute settlement court orders.
