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By: Amy C. Bender
Many employers, in an effort to protect their valuable personnel and information, require employees to sign agreements containing restrictive covenants, which may include covenants not to compete, not to solicit employees or customers, or not to disclose confidential information. Georgia’s statute on restrictive covenants (O.C.G.A. § 13-5-80 et seq.), which was passed only a few years ago, generally is viewed as being pro-employer. It provides clear guidance on what types of limitations and language courts will consider reasonable and enforceable, and it allows courts to “blue pencil” (mark through) provisions that do not comply in order to give effect to the remainder of the agreement and achieve what the parties intended. The statute, however, applies only to agreements entered into on or after May 11, 2011.
As some recent Georgia Court of Appeals cases (Burson v. Milton Hall Surgical Associates, LLC and CMGRP, INC. v. Gallant) remind us, any agreements signed before that date will be interpreted according to principles developed through “common law” (case law). Under common law, restrictive covenants by default were disfavored and considered an illegal restraint of trade unless the employer could show they were reasonable. This often proved to be a difficult task for employers since the cases were confusing and at times inconsistent. Importantly, courts also did not have blue-penciling power; if even one part of a covenant was not enforceable, the whole covenant failed. Burson and CMGRP, while both filed several years after the enactment of Section 13-5-80, involved agreements that the employees had signed before the statute’s effective date. As a result, the agreements were analyzed under the old common law.
These cases serve as a good reminder to Georgia employers to review their restrictive covenant agreements to make sure they are up-to-date. If employers have any agreements that were signed before May 11, 2011, we recommend preparing and having employees sign new agreements that comply with the statute. FMG’s Labor and Employment Law team can assist your organization in reviewing current agreements, preparing new agreements, and representing you in disputes regarding agreements.
If you have any questions or would like more information, please contact Amy Bender at [email protected].