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Federal Court Addresses Georgia Restrictive Covenant Rules

Posted on: October 21st, 2020

By: Ken Menendez

Employers regularly grapple with the interpretation and application of the law regarding restrictive covenants. Court rulings in such cases are often drawn narrowly to address the specific facts of the case at issue and therefore can be of limited value in providing guidance to employer and employee alike. In light of this, decisions which establish clear rules of interpretation are always welcome.

One such decision was recently issued by the United States District Court for the Northern District of Georgia. Georgia’s restrictive covenant statute states that covenants not to compete are generally enforceable so long as they are “reasonable in time, geographic area and scope of prohibited activities.” O.C.G.A. § 13-8-53(a). In Chef Merito v. Javier Gonzalez, et. al., No. 1:20-cv-1242-AT, 2020 U.S. Dist. LEXIS 171934 (N.D. Ga.August 19, 2020), the employer sought a temporary restraining order preventing two former employees from engaging in competitive sales activities on the basis of a covenant not to compete contained in their employment agreements. The covenant did not contain a geographic limitation. The employer conceded this, but argued that because the Georgia statute allows the court to blue-pencil a contract, the court should utilize that power to modify the covenant to apply to a territory comprised of the sales routes covered by the employees in question.

The court denied the request for a temporary restraining order, stating emphatically that “a trial court may not under the guise of the ‘blue pencil’ method reform a contract which is otherwise unenforceable by reason of vagueness…The ‘blue pencil’ marks, but it does not write. It may limit an area, thus making it reasonable, but it may not rewrite a contact void for vagueness, making it definite by designating a new, clearly demarcated area.” Chef Merito, at p. 15 (Hamrick v. Kelley, 392 S.E. 2d 518, 518-19 (Ga. 1990); see also Wind Logistics Professional, LLC v. Universal Truckload, Inc., No. 1:16-cv-00068, 2019 WL. 4600055 at *10 (N.D. Ga. 2019 (stating that courts “cannot ‘reform and rewrite’ contracts to make them acceptable to Georgia public policy.”).

In Chef Merito, the court makes clear that in Georgia blue pencils are to be used for subtraction, but not for addition. In the wake of this decision, parties asking Georgia courts to engraft geographic parameters onto covenants which do not contain them are likely to come away empty-handed.

If you have questions or would like more information, please contact Ken Menendez at [email protected].

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