Properly drafted non-compete agreements, signed after May 2011, are enforceable in the State of Georgia. In fact, the laws governing the enforceability of non-compete agreements are favorable for businesses in the state. The key to enforceability is construction and consideration. The state laws provide broad latitude and application. However, there are still some limitations. Employers must balance legal requirements with legitimate and documented business needs to ensure enforceability of effective non-compete agreements.
There are five (5) primary factors to consider when drafting and implementing a non-compete agreement in Georgia:
- Covered Positions
- Scope, Geographic Range and Duration
- Non-Solicitation and Non-Disclosure Provisions
Understanding and properly crafting terms that match these concepts with an employer’s business needs is critical to enforceability of the non-compete agreement.
Consideration equates to providing something of value. It does not have to be a monetary figure per se. It may be additional vacation time, a particular territory or work location – remote employment. However, Georgia employers that seek to have current employees execute a non-compete agreement must provide some reasonable measure of consideration, in the agreement, for the non-compete to remain enforceable. Consideration is discretionary and can be changed from agreement to agreement or from position to position. New employees may be required to execute a non-compete, at the time of hire, without additional consideration as the new position is deemed requisite consideration.
Current Georgia law provides that a non-compete agreement does not fail just because it contains an unenforceable term. Instead, the court has the ability to remove or modify these terms while leaving the overall agreement intact so long as the change will not make the agreement more restrictive or compromise the original intent of the agreement. This is known as the blue pencil rule of severability. This ability to modify the terms of the agreement is one reason Georgia law pertaining to non-compete agreements is considered “employer friendly”.
One element of Georgia’s non-compete law that is relatively distinct is the limit of application to four distinct employment positions or categories:
- Sales staff
- Vital employees or company professionals
- Employees in management positions
- Employees who regularly solicit business from customers
Employers may only apply non-compete agreements to employees in these positions. However, the law allows broad latitude in the description of these categories. This is an area that requires some legal nuance. For some employers, the categories provide an easy application. Where the categorization is less clear, employers would do well to consult legal counsel for the development of appropriate job descriptions in an effort to document essential functions consistent with these positions. Recent challenges have witnessed the invalidation of non-compete agreements where employers have been found to stretch the limitations of definitions and application too far.
The scope of prohibited activity, the geographic range of coverage, and duration or length of time the agreement remains in effect are all factors considered in determining the enforceability of the non-compete agreement. Generally, two years is an acceptable duration for enforceability. Longer terms have been upheld but only under unique circumstances. Scope and geographic range are less well-defined by the law as “reasonable” parameters are predicated on the position and expanse of the company. What might be reasonable for a large global business might be absurd in its application by a small, local employer. Employers with plans for expansion can include territories they plan to market in the future. Scope, geographic range and duration are concepts that benefit from legal oversight and finesse – employers that have any doubt or concern as to the enforceability of a non-compete should consult employment counsel for guidance.
Under Georgia law, employers may include provisions for non-solicitation of both employees and clients as well as provisions for non-disclosure of confidential information and trade secrets. Non-solicitation clauses can prevent former employees from soliciting clients or other employees provided that the former employee had a prior working relationship with those parties. Employers cannot prevent separated employees from contacting employees or clients they did not work with during their tenure with the employer. Similarly, non-disclosure provisions are enforceable if the information covered continues to be a trade secret and/or confidential. Documentation either of the past employment practices and/or the confidentiality of information and its critical importance to the business remain vital to substantiate the enforceability of the agreement. Employers must be able to prove the reasonableness of their position.
To avoid a lengthy court process, however, businesses should review their non-compete agreements to make sure all the terms are enforceable. Appropriate and effective job descriptions are an important part of this review process as is a careful analysis of legitimate business needs, scope and geographic footprint. Employers are encouraged to engage competent employment counsel to ensure compliance. The value of a non-compete agreement resides in its enforceability. Misapplication of overly broad terms may result in costly litigation and compromise to the spirit and purpose of the agreement. Our Employment Practices Group remains available to answer any questions or concerns employers might have related to review of existing or drafting new non-compete agreements. Contact a member of our Employment Practices Group at 1-888-488-2638.