August 11, 2023
Stites & Harbison PLLC
To print this article, all you need to do is register or log in to Mondaq.com.
For the second time in five years, a divided panel of the Georgia Court of Appeals has ruled that a restrictive post-employment agreement without geographic restrictions is enforceable only in certain circumstances. The bottom line for employers is that post-employment restrictions on efforts to solicit a former employer’s clients or restrictions on the use of trade secrets do not require geographic restrictions, but all other post-employment restrictions do. Employers should be safe if they want their agreements to be enforceable or blue penciled under Georgian law.
The earlier case that touched on this topic, Carpet Care Multiservices v. Carle, 347 Ga. App. 497 (2018) was persuasive authority only because there was an appeal and the decision was issued before August 1, 2020. The Court of Appeals adopted Carpet Care’s reasoning in N. Am. Senior Benefits, LLC v. Wimmer, No. A23A0162, 2023 WL 3963931 (Ga. Ct. App. June 13, 2023). Although there was also a disagreement in Wimmer, the latest decision sets binding precedent under current Georgia Court of Appeals rules.
The questions in the Wimmer case were whether the following restrictive agreement was enforceable or could be implemented with a blue pencil:
Non-Soliciting of Employees and Independent Contractors: During the term of the Licensed Agent’s contract with NASB and for a period of two (2) years after termination of the contract, the Licensed Agent shall not, directly or indirectly: (a) solicit for the Purpose [of] Services or employment of an employee, agent or independent contractor of NASB, (b) advise or recommend another person they employ or solicit for the provision of services, an employee or independent contractor for NASB, (c) such employees, agents encourage or advise or independent contractors to terminate, terminate or not renew any agreement or relationship with NASB, or (d) otherwise establish a business relationship with such employee, agent or independent contractor in connection with the sale of insurance products or to strive for.
The Georgia State Business Court ruled that the restrictive agreement was unenforceable because it was not subject to any geographic restriction, trade secrets, or non-solicitation of customers. It also ruled that there was no point in applying a geographical restriction as the original treaty did not contain any restriction. The Court of Appeal upheld the dissident’s argument that there was an implicit geographic restriction as the agreement was limited to certain individuals, all working within a definable geographic area, and declined to adopt it.
This may not be the end of the road. The Wimmer complainant has petitioned the Georgia Supreme Court for certification. Given the two divided opinions of the Circuit Court of Appeals within five years on the same question of interpretation of the law, this may be one of the rare cases to attract the attention of the Georgia Supreme Court.
The content of this article is intended to provide a general guide to the topic. Professional advice should be sought as to your specific circumstances.
POPULAR ARTICLES ABOUT: Litigation, Mediation and Arbitration from the United States
Will Supreme Court Review Transform SEC Enforcement?
Arnold & Porter
Christian Schultz, Partner at Securities Enforcement & Litigation, was recently featured in numerous publications – including Fortune, Barron’s, CoinDesk and Blockworks – about a case between crypto…
