Restrictive Covenants in Georgia Employment Agreements

In 2011, the Georgia Legislature passed the Georgia Restrictive Covenants Act. This represented a major change in Georgia's public policy towards restrictive covenants in employment agreements. Prior to 2011 Georgia's public policy was notably hostile towards enforcing restrictive covenants in employment agreements generally and non-competes in particular. Before 2011, Georgia employment contracts had to be written according to specific rules set out by the judiciary that, if not followed precisely, would cause the non-compete covenants to be completely unenforceable.

However, in 2011 Georgia's public policy on restrictive covenants in employment agreements became much more tolerant of restrictive covenants. And they are now more easily enforceable for many employees.

Restrictive covenants come in several different types. These include non-disclosure, non-solicitation, and non-competition provisions.

NONDISCLOSURE AGREMENTS

Nondisclosure agreements limit the ability of a former employee to use or disclose confidential information gained in connection with employment. The new law defines confidential information very broadly to include trade secrets, methods of operation, names of customers, price lists, financial information and projections, route books, personnel data, and similar information, as long as that information is not generally known to the public.

Furthermore, nothing in the law limits the period of time a party may agree to maintain information as confidential or as a trade secret, or to limit the geographic area within which such information must be kept confidential or as a trade secret, for so long as the information or material remains confidential or a trade secret.

NONSOLICITATION AGREEMENTS

Customer non-solicitation agreements are expressly permitted under the new law, but are limited by requirements of "material contact" with actual or prospective customers of the former employer, and the provision of competitive products or services. No express reference to any geographic area or the types of products or services considered to be competitive is required for the restraint to be enforceable. Any reference to a prohibition against "soliciting or attempting to solicit business from customers" or similar language is adequate.

NONCOMPETE AGREEMENTS

The enforceability of non-competition provisions in an employment agreement depends on whether the restrictions imposed by the terms of the agreement are reasonable in time, geographic area, and the scope of the prohibited activities. The statute now also limits the employees to whom a restrictive covenant may be applied after the term of employment has ended to former employees who were sales people, managers, other key employees, and professionals.

As noted above the geographic scope of the restriction must be reasonable. Employers are also afforded the option to include a list of particular competitors as prohibited employers, as an alternative to the specification of a territory or a distance from a particular business location.

The law also has created a series of legal presumptions as to the reasonableness of the duration of certain non-compete agreements. All the presumptions are rebuttable based on the evidence in a particular case. They range in duration from two to five years and differ based upon the classification of the interests of the persons against whom the covenant is sought to be enforced.

Usually the issue of the enforceability of a non-compete arises at the end of the business relationship. But some employers include non-competes in their employment agreements that operate during the relationship. It is worth noting that provisions that restrict competition during the term of the ongoing business relationship will not be considered unreasonable because they lack any specific limitation upon scope of activity, duration, or geographic area, as long as they promote or protect the purpose or subject matter of the agreement or relationship or deter any potential conflict of interest.

The most far reaching change in the law was to allow the court to modify the restraint provision and grant only the relief reasonably necessary to protect the legitimate business interests of the party seeking to enforce the restrictive covenant. In effect the court now has the authority to revise or rewrite a facially invalid noncompetition agreement to render it compliant with the terms of current Georgia law.

The remedies for violations of a restrictive covenant include any available and effective remedies at law or in equity, including temporary or permanent injunctions.

If you need assistance writing nondisclosure, non-solicitation, or non-compete agreements to protect your business, or if you have signed a nondisclosure, non-solicitation, or non-compete agreement that limits your options for future employment, then please feel free to call us for a consultation.