Historically, Georgia has been extremely hostile to employer-employee non-compete covenants by applying “strict scrutiny” to their terms. This stance resulted from a provision in the Georgia Constitution prohibiting the legislature from enacting laws in restraint of trade, which the Georgia courts considered to severely limit their ability to enforce non-compete covenants. The only potentially viable solution was to include a forum selection clause in the agreement to get your case out of Georgia. That has finally changed.
On November 2, 2010, Georgia voters ratified a proposed constitutional amendment allowing the Georgia Legislature to enact laws to authorize non-compete covenants between employers and employees (and other types of business relationships). Six months earlier, in April 2009, Gov. Perdue signed legislation (HB 173, sometimes called the Georgia Restrictive Covenant Act) that sets out rules for crafting enforceable employer-employee non-compete covenants. The approval of the constitutional amendment by voters was the final step in allowing this legislation to become effective. The new law only applies to contracts entered into on or after November 3, 2010.
The legislation significantly changes Georgia law with respect to non-compete covenants entered into on or after November 3, including by:
- Expressly authorizing non-compete covenants between employers and employees provided they meet the requirements of the statute;
- Defining the types of employees who may be subject to a non-compete covenant;
- Setting specific standards for drafting restrictive covenants and defining specific language that should be used in the covenant;
- Empowering Georgia courts to “blue pencil” non-compete covenants under certain circumstances to make them enforceable; and
- Establishing a presumptively reasonable time limit for the restriction of two years after termination of employment.
The new law is available here.
Employers with workforces in Georgia who have shied away from non-compete covenants now have an opportunity to issue new or revised agreements. In order to take advantage of this new law, employers will need to draft or rewrite their Georgia covenants to meet the strict requirements of the statute. Covenants entered into before November 3 will continue to be governed by Georgia law as it existed prior to the enactment of this new legislation.