By Roy E. Lachman
For employers with restrictive covenants with their employees, Georgia’s recent constitutional amendment makes a dramatic change in Georgia law. Before the amendment, Georgia courts were hostile to restrictive covenants such as non-competition, non-solicitation, and confidentiality provisions. If a court found any of the covenants in an agreement to be unreasonable, then the court would strike down the entire agreement. This could harm the employer not only with respect to the employee involved in the case, but also with respect to all other employees who had signed similar agreements. As a result, an employer could lose all its contractual protections with its employees.
The recent amendment ends the risk for employers in Georgia, and conforms its law to that of the majority of other jurisdictions. A Georgia court will now have “the power to limit the duration, geographic area, and scope of prohibited activities in a contract…to render such contract…reasonable under the circumstances for which it was made.” This means that even if a court finds a covenant restriction unreasonable, the court will not invalidate the entire agreement. Instead, it can modify the provision to a reasonable restriction under the circumstances.
This amendment was intended to attract businesses to Georgia and to enhance the predictability of employment agreements in that state. However, even with the amendment now in place, employers should continue to exercise care to draft agreements with reasonable restrictions. Such careful drafting will provide greater certainty that the restrictions will apply. If you have any questions about restrictive covenants, please do not hesitate to contact us.
