Prior to the enactment of Georgia’s Restrictive Covenant Act (“RCA”) in May 2011, the Georgian courts uniformly declared the non-compete provisions void and unenforceable in the employer-employee context “in any capacity”. Non-competition clauses “in any capacity” are those provisions that prohibit an employee from working for a competitor in any capacity and are not limited to the types of duties that the employee has performed for his current employer. And under former Georgia common law, a court was not permitted to reverse an otherwise invalid and unenforceable provision to make it enforceable.
However, the RCA expressly permits—but does not require—the court to “modify” an overly broad non-compete clause to make it enforceable. Since the RCA came into force, there have been a few instances of an attempt to define what “modify” means under the RCA.
Against this background, in mid-December 2022, a federal court in the Southern District of Georgia in Amspec, LLC dealt with Calhoun et al. with a non-compete provision that stated, among other things, that the employee would not “act as an employee, employer, owner, operator…” for “a company engaged in the same or similar business as AmSpec…” where he ” makes a contribution[d] his knowledge” to this competing company.
After a lengthy discussion of what ‘contribution of knowledge’ means, the court moved on to the ‘janitor’s rule’, ie the employee’s argument that the provision, as amended, prohibits the employee ‘from engaging in any activity’. [for a competitor] … even if the work is not competitive [Amspec’s] Business – this includes, for example, working as a secretary or a janitor.” The court agreed that it was a non-compete obligation “in every capacity”.
Citing a 2022 Georgia Court of Appeals decision, Burbach v. Motorsports of Conyers, LLC, the AmSpec court then ruled that non-competition clauses are invalid “in every capacity” and unenforceable. The court then exercised its discretion to refuse to amend the agreement to make it enforceable. In doing so, it argued that AmSpec did not offer a narrower interpretation of the non-competition clause that would restrict it from prohibiting the employee from performing services similar to those he is performing on AmSpec’s behalf, and therefore would not offer narrower language to Amspec.
It is worth noting that the Burbach court (on which the Amspec court relied) based its decision on Georgia common law, which predates the RCA’s enactment. It is also worth noting that on December 20, 2022, the Georgia Supreme Court agreed to hear an appeal of the Burbach decision.
bottom line: Under Amspec and Burbach — at least pending appeal — companies should review their restrictive Georgia covenant agreements and ensure that any non-compete provisions include, among other things, a limitation on the types of duties that are prohibited for an employee to act on behalf of a competitor .
