Although the pre-May 11, 2011 law is often referred to as the “old law,” it is still applicable to contracts entered into before that date. In this blog post, we will discuss the basics of the old law and provide specific examples of its interpretation by Georgia courts. It’s worth noting that the old Georgia common law tends to be more favorable to employees and less favorable to employers seeking to enforce restrictive covenant provisions.
Under the old law, restrictive covenants in employment agreements are subject to strict scrutiny and will only be enforceable if they are deemed reasonable in terms of time, territorial coverage, and the scope of activity being restricted. The reasonableness is evaluated by considering the legitimate business interests the employer seeks to protect and the impact on the employee. Notably, if one part of a non-compete clause fails to meet the requirements, all restrictive covenants in the employment contract will also fail. This differs from the May 11, 2011 law, which we will explore in the next blog post.
Now, let’s delve into the specifics of what “reasonable” means in terms of duration, territorial coverage, and the scope of activity being precluded. In Georgia, and under the old law, a non-compete clause must include a specific “territorial limitation” that provides the employee with notice of what would violate the restrictive covenant. The territory must be described with particularity, often by specifying cities, counties, zip codes, or by attaching a map.
However, it’s important to note that employers cannot arbitrarily choose any area to restrict employees from competition. Georgia courts have held that the territory description must not only be specific but also strike a balance between the employee’s right to earn a living without unreasonable restrictions and the employer’s right to protect their business interests. An example of an overly broad territory description can be seen in the Paramount Tax & Accounting, LLC v. H&R Block Eastern Enterprises, Inc. case, where the restriction was deemed unenforceable because it essentially prevented the employee from working anywhere in the United States.
Additionally, under the old law, non-compete agreements must have a time limitation. There is no fixed rule for what constitutes a reasonable time limitation, as courts have found various durations to be acceptable. Each agreement is evaluated individually based on the specific facts and circumstances of the employment.
Furthermore, Georgia courts consider the scope of activity prohibited when determining the enforceability of a non-compete under the old law. The phrase “in any capacity” has routinely been held unenforceable, rendering the entire agreement unenforceable. Instead, the prohibited activity must have some similarity to the former employer’s business activities, and the restriction should be narrowly tailored to protect the legitimate business interests of the employer.
For more information on restrictive covenants or if you have questions about your specific employment situation, please consult an experienced attorney for guidance.