A non-compete agreement is the cornerstone of many employment contracts. Company owners want the reassurance that should an employee leave, he or she will not go to work for a competitor or use company information for another firm’s benefit. Many business owners assume non-compete agreements are relatively straightforward and that they have a fair amount of latitude in creating them. However, some legislatures, including Georgia’s, have changed their laws and statutes in ways that significantly impact non-compete rules.
Non-compete agreements fall under the classification of “restrictive covenants”—which, in the personnel world, means agreements that restrict employees on and/or after the job. Many states have laws that support reasonable non-compete agreements, but states, counties, cities and the federal government all may limit restrictions on employees, both current and former.
Furthermore, the laws surrounding non-competes can be fluid based upon current legislative attitudes. In Georgia, changes to Title 13 of the Official Code of Georgia, which deals with contracts, have altered the way that non-competes can be structured—and may increase the frequency with which they will be litigated.
Restrictions by Job Classification: O.C.G.A. § 13-8-53 essentially restricts non-competes to two employee classifications—sales and management. (The language is more restrictive and specific than this; it includes definitions similar to some, but not all, Department of Labor descriptions for Exempt employees.) In the past, employers could request that any employee sign a non-compete or non-solicit agreement, no matter what their position or level of responsibility was within the firm.
Ability to Modify: O.C.G.A. § 13-8-54 allows judges to modify non-competes that are unreasonable rather than striking them down unilaterally. Historically, Georgia courts have considered one-year non-compete agreements acceptable, and many have supported two-year non-competes if the employer could demonstrate a reasonable need. However, excessive non-competes—for three, five or more years—were often thrown out if challenged. Under recent statutory revisions, judges still have that option, but they can also require modification of the terms to make them “reasonable.”
These changes to the law can both hinder and help business owners in their efforts to protect sensitive company information and restrict customer poaching. Our legal partner, Jefferson Allen of Cohen, Cooper, Estep & Allen, provided his thoughts on the impact. “The amendments to Georgia law will undoubtedly restrict employers from blanketing their entire workforce with restrictive covenants,” Allen said.
“Conversely, while these changes may allow more restrictive covenants to survive judicial scrutiny, they may also lead to more legal challenges. Before the latest statutory revisions, most lawyers could tell quickly if a non-compete was enforceable or not, but this new judicial discretion represents a significant change over the past when the validity of terms was relatively straightforward.”