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FMG Law Blog Line

The Eleventh Circuit Rules First Restrictive Covenant Law as Unconstitutional

Posted on: June 27th, 2012

By: Brad Adler

For those that have followed the saga over the passage of the new restrictive covenant law, the Eleventh Circuit (without much fanfare) has chimed in on the issue and ruled that the Georgia legislature’s first attempt to pass the employer-friendly statute (known as HB 173) was constitutionally deficient.

As a result, the Court concluded that HB 173 was unconstitutional and void.  The result is that any restrictive covenant agreement signed by an employee before May 11, 2011 will be governed by pre-HB 173 law (which is very pro-employee).

The one piece of good news from this decision is that the Court confirmed that the legislature’s second attempt to pass the new statute (HB 30) was legally proper and applies to agreements signed on or after May 11, 2011.

For those employers that had employees sign new restrictive covenant agreements between November 2, 2010 and May 10, 2011 based on the assumption that HB 173 applied, it will be necessary to get those employees to resign the agreement for the covenants to fall under the new law (HB 30).  The Eleventh Circuit’s decision is Becham v. Synthes USA, 2012 WL 1994604 (11th Cir. June 4, 2012).

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