As previously noted in Jackson Lewis’ Non-Compete & Trade Secrets Report, Georgia adopted legislation governing restrictive covenant agreements entered into on or after May 11, 2011. This law, however, does not address employee non-solicitation (i.e., anti-pirating) covenants, leaving courts to apply common law to such restrictions. Georgia common law can be confusing and even contradictory on certain issues, such as whether an anti-pirating covenant must be limited to a specific geographic territory or to employees with whom the covenanting employee had contact. The Georgia Court of Appeals for the Fourth Division addressed both issues in a recent decision, CMGRP, Inc. v. Gallant, No. A17A1168 (Ga. Ct. App. Oct. 4, 2017).
Gallant began working for a unit of CMGRP in October 2008. On October 7, 2008, she executed an employment agreement prohibiting her from “recruiting or hiring any employee of [CMGRP] for a period of one year following her resignation.” Notably, this anti-pirating covenant was not limited to a particular geographic territory or to employees of CMGRP with whom Gallant had any contact or relationship.
The trial court initially rejected the anti-pirating covenant because it was not limited to employees with whom Gallant had established relationships at CMGRP. The Court of Appeals reversed the trial court’s order, however, based on prior holdings in which it “repeatedly upheld employee non-recruitment provisions that were not limited to employees with whom the former employee had an established relationship.” Notably, the Court acknowledged a seemingly contradictory decision in which it criticized a non-solicitation covenant for prohibiting the solicitation of employees with whom the employee had no prior contact. The Court explained that the matter at issue in that case was actually a separate non-compete covenant, and its discussion of the non-solicitation covenant was merely “dicta” that “lack[ed] the force of an adjudication.”
In addition to challenging the anti-pirating covenant’s application to employees with whom she had no established relationship, Gallant also argued the pirating covenant was unenforceable because it lacked a geographic territory. Though she ultimately abandoned that argument, the Court of Appeals found it “worth noting that this Court has upheld employee non-recruitment provisions that lacked a geographic limitation.”
This is a pro-employer decision, as the Court was clear that an anti-pirating covenant need not be limited to a particular geographic territory or to employees with whom the soliciting employee had material contact. Moreover, because Georgia’s recent restrictive covenant legislation does not apply to anti-pirating covenants, the Gallant decision is instructive in all cases involving such covenants, regardless of the date of the agreement. Employers should be aware, however, that other courts of appeals in Georgia have issued conflicting holdings, and those courts are not bound by the ruling in Gallant.