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New Georgia Law on Non-compete Agreements Exposed to Legal Challenge

On November 2, 2010, Georgia voters approved a constitutional amendment which allows for much stricter constraints of trade for Georgia workers. The new law allows Georgia courts to “blue pencil” restrictive covenants in employment contracts. In other words, no matter how onerous and restrictive an employer writes a non-compete clause or non-solicitation clause, it will now be enforced to the extent that the law allows. This changes the current law which calls for the entire restrictive covenant to be held unenforceable, if any portions of it were beyond the scope of what was permissible (either overly broad in time, geography or scope).

The new law is suspect because the drafters of Georgia House Bill 173 stated it would be effective on November 3, 2010. However, the Georgia Constitution states that the new laws such as this one must take effect on January 1 of the following year.

The legal effect of the drafting snafu is not certain and will probably need to wind its way through the courts in “test cases.” However, as a practical matter, which is what most former employees who wish to break away from their former employers and start a competing business should be concerned with, it appears that: (1) any employment contract executed prior to November 3, 2010 which contains a restrictive covenant (non-compete or non-solicitation clause) is not subject to the new law; (2) any any employment contract executed after to November 3, 2010 which contains a restrictive covenant (non-compete or non-solicitation clause) is subject to the new law but may not be enforceable as the new law’s start date may be held unconstitutional.

Needless to say, this is a complicated area of Georgia law which has great importance, especially to those hard-working Georgians who wish to compete with their former employers in the Atlanta area. Robert J. Fleming,, is committed to applying both federal and Georgia wage laws in order to allow our clients to fully recover the money they are owed when pursuing a pay dispute or commission dispute. Many times, a former employers seeks to enforce a non-compete or non-solicitation clause against a former employee when, in fact, the clause is not legally enforceable.

Sources:

Aaron Gould Sheinin. “Noncompete Measure at Risk.” Atlanta Journal Constitution. November 17, 2010.