Georgia appellate courts have regularly struck down restrictive covenants for years. The Georgia Court of Appeals did so again recently in Early v. MiMedx Grp., Inc. , 330 Ga. App. 652 (2015). That in itself is not remarkable. The Early case, however, serves as a reminder of the importance of considering whether to have key employees (or franchisees, licensees, physicians, etc.) execute new restrictive covenants to take advantage of the protections of Georgia’s revised restrictive covenant law.
The new law applies to restrictive covenants entered into after May 2011 – it does not apply retroactively; the Early case involved a February 2011 restrictive covenant and accordingly fell within the old law. The new law not only provides greater clarity as to what renders a restrictive covenant enforceable, it also allows for so-called blue penciling that can save a restrictive covenant from failing based on a single overbroad aspect.
The practical takeaway from the Early case (and many others like it issuing regularly from Georgia’s appellate courts) is the importance of auditing key existing agreements containing restrictive covenants. It will save a business a great deal of headache and expense if, say, the key executive, scientist, salesperson, or physician is bound by restrictive covenants entered into after May 11, 2011. Offering a monetary payment in exchange for a new agreement has the potential to be a bargain should litigation occur in the future because it will help avoid the often uphill battle involved in enforcing a restrictive covenant under the old law.
In conclusion, although many lawyers and businesspeople are aware of the change in Georgia’s restrictive covenant law, experience shows that few have audited their agreements to ensure they are able to avail themselves of the new law’s enhancements.