Articles Discussing Restrictive Covenants In Georgia.

On September 6, 2023, the Georgia Supreme Court reaffirmed that Georgia courts must first determine whether a restrictive covenant is enforceable under Georgia law before applying a foreign choice-of-law provision.

Historically, Georgia courts have declined to apply another state’s law to determine whether to enforce restrictive covenants against a Georgia employee, regardless of whether the agreement stated that another state’s law controlled (choice-of-law provision). So, too, Georgia’s law has long distinguished between restrictive covenants that are reasonable (in scope, duration, and geographic reach) and those that are unreasonable; the former are enforceable, while the latter are considered “in general restraint of trade.” Contracts that are “in general restraint of trade” are “deemed to be contrary to public policy” and “cannot be enforced” in Georgia. O.C.G.A. 13-8-2(a).

The Georgia Court of Appeals recently provided important clarification of the requirements for non-recruitment covenants under Georgia’s 2011 Restrictive Covenants Act. In North American Senior Benefits, LLC v. Wimmer, 2023 WL 3963931 (Ga Ct. App. June 12, 2023), the court held that an employee non-solicitation provision must contain an

Prior to the enactment of Georgia’s Restrictive Covenant Act (“RCA”) in May 2011, Georgia courts uniformly held void and unenforceable “in any capacity” non-compete provisions in the employer-employee context. “In any capacity” non-competes are those provisions that prohibit an employee from working for a competitor in any capacity and not limited to the types of duties that the employee performed for his current employer. And under Georgia’s prior common law, a court was not allowed to revise an otherwise void and unenforceable provision to render it enforceable.

Earlier this year, in Steuer v. Tomaras, et al., Georgia’s Statewide Business Court again refused to modify certain restrictive covenants that were missing a territory. Dr. Steuer, a former partner of the defendant doctors, sought to enforce restrictive covenants. The doctor defendants sought to declare the non-compete and non-solicit provisions contained in the agreements unenforceable.

Last month, in American Plumbing Professionals, Inc. v. ServeStar, LLC, Georgia’s Court of Appeals reversed a trial court’s determination that a non-compete provision was unenforceable and void because its territory was too broad. The non-compete at issue defined the geographic restriction as “the territory where Employee provided services on behalf of [the employer] during the last twelve months of his or her employment,” which extended “throughout those parts of the United States of America where [the employer] transacts business.” 

In Tanium v. Yago et al., the U.S. District Court for the Northern District of Georgia recently reminded us of a few things: (1) customer contact information can constitute a trade secret; (2) the Georgia Restrictive Covenant Act (“RCA”) provides a court greater freedom to modify an otherwise overbroad restriction; (3) a non-solicit of employees provision may be liberally enforced; and (4) bad acts performed by an employee prior to his departure from a company influence how a court rules.

The more things change, the more they stay the same.  That adage is apparent in Georgia’s non-compete law, which had a major overhaul in May 2011, when Georgia’s Restrictive Covenant Act (RCA) became effective. The RCA applies to restrictive covenant agreements entered into after May 2011, whereas Georgia’s well-developed common law applies to agreements entered into prior to that date. Nevertheless, prior common law themes play out time and again in Georgia courts’ interpretation of the RCA. One such theme is that a court is not allowed to extend a non-compete provision beyond the terms drafted in the agreement.

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.

Although Georgia’s Restrictive Covenants Act has been on the books since the spring of 2011, no judge has decided the exact scope of Georgia courts’ blue-penciling abilities – until now. In a case of first impression, Judge Thrash of the United States District Court for the Northern District of Georgia, in LifeBrite Laboratories, LLC v. Nina H. Cooksey, 1:15-cv-04309 (N.D. Ga. Dec. 9, 2016), held that the term “modify” in Georgia’s Restrictive Covenants Act limits blue-penciling to striking unreasonable restrictions and to narrowing overbroad, existing terms.

It’s time to bring back FordHarrison’s Non-Compete News! And what better way to kick off 2017 than with Lifebrite Labs, LLC v. Cooksey (N.D. Ga. December 2016), Georgia’s first-ever published decision interpreting how a Georgia court may modify a non-compete provision that is overbroad under Georgia’s Non-Compete Statute, O.C.G.A. 13-8-51 et al. a/k/a the “blue penciling” statute.

Many employers require their employees sign agreements containing a “loyalty provision.” That is, a clause that requires the employee to devote all or most of his/her working time to the employer’s endeavors, while the employee remains employed by the employer. What many employers fail to realize, however, is that some states treat such loyalty provisions as restrictive covenants. Thus, as a recent decision from the Georgia Court of Appeals reminds, these loyalty provisions must comply with restrictive covenant law. See Early, et al v. MiMedx Group, Inc., 330 Ga. App. 652 (Feb. 10, 2015).

The Georgia Court of Appeals handed down a tough lesson for an employer in Mapei Corporation v. Prosser, A14A0368 (Ga. Ct. App. July 9, 2014). The Court of Appeals affirmed summary judgment for an employee on the claim he breached his non-compete with his prior employer. The Court found a subsequent confidentiality agreement signed by the former employee omitted the non-compete covenant that the prior confidentiality agreement contained. The Court found the subsequent agreement replaced the earlier-entered agreement containing the non-compete covenant because the subsequent confidentiality agreement covered the same subject matter and contained a superseding-agreement clause stating the agreement “totally replaces all prior contract agreements or understandings… about confidential information or any other subject matter contained herein.”

The inevitable disclosure doctrine is a common law doctrine that has been used by some courts to prevent a former employee from working for a competitor, even in the absence of a non-compete, because the former employee’s new job duties would inevitably require him to rely upon, use or disclose his former employer’s trade secrets. This doctrine, however, remains the subject of considerable debate. Recently, the Georgia Supreme Court joined the debate in Holton v. Physician Oncology Services, LP, 2013 Ga. LEXIS 414 (May 6, 2013) and rejected the doctrine.

As previously reported in a legal alert issued by Jackson Lewis on May 12, 2011, Georgia Governor Nathan Deal signed the Georgia Restrictive Covenants Act into law almost two years ago, on May 11, 2011. Since that time, many employers have required employees to sign new covenants that comply with the law.