The Georgia Court of Appeals recently issued a decision that has significant implications for drafting and enforcement of restrictive covenants, including non-competes, customer non-solicits and employee non-solicits and non-recruitment provisions.<\/p>\n\n\n\n
Restrictive Covenant Litigation The trial court had struck the no-hire and employee\nnon-recruitment covenants at issue, finding that the RCA does not apply to them\nand that they were unenforceable under the common law. Not surprisingly, the court reversed the\ntrial court\u2019s decision that the RCA does not apply to employee no-hire and\nemployee non-solicitation covenants. The court recognized that the RCA defines\nthe term \u201crestrictive covenant\u201d in part as \u201can agreement between two or more\nparties that exists to protect the first party\u2019s or parties\u2019 interest in\nproperty, confidential information, customer good will, business relationships,\nemployees<\/em>, \u2026\u201d (emphasis supplied). Therefore, reading that section of\nthe statute in conjunction with O.C.G.A. section 13-8-54(b), the court held\nthat the \u201cclear and plain language of these two provisions compels a conclusion\nthat any<\/em> agreement that meets the Act\u2019s definition of restrictive\ncovenant, and is not otherwise excepted from the Act\u2019s provisions, is subject\nto the terms of the Act and must comply with the terms of the Act.\u201d<\/p>\n\n\n\n In addition to finding that the employee no-hire\/non-solicitation\ncovenant was unreasonable under the common law, the trial court had made the\nalternative finding that even if the RCA applied, the provisions were facially\nunreasonable and overly broad under the RCA. The trial court also declined to\nblue-pencil the covenant to render it enforceable. On appeal, the company\nargued that the trial court abused its discretion in declining to modify the\ncovenants. The Court of Appeals again looked to O.C.G.A. section 13-8-54(b) and\nnoted that the statute provides a trial court \u201cmay modify\u201d a restraint that\ndoes not comply with the RCA. The Court\nof Appeals confirmed that the term \u201cmay\u201d here means that modification is not mandatory.\nTo the contrary, the Court concluded, \u201cit is within a trial court\u2019s discretion whether\nor not to apply the Act\u2019s blue pencil provisions.\u201d The Court went on to hold\nthat the trial court had properly considered the company\u2019s legitimate business\ninterests and concluded they did not warrant a modification of the covenants to\nmake them enforceable, so it had not abused its discretion in declining to\nmodify the covenants.<\/p>\n\n\n\n In coming to this conclusion, the Court of Appeals\npotentially side-stepped the issue of whether under the RCA the blue-pencil can\nonly strike words that render a covenant overbroad or whether the court can\njudicially modify the covenant to rewrite the agreement for the parties and\nenforce what the court finds to be reasonable. Aside from the statute itself\nand some federal district court decisions, there is still no guidance from\nGeorgia appellate courts on this issue.<\/p>\n\n\n\n Finally, the Court of Appeals held that the RCA does not\nchange its prior conclusion that unreasonable restrictive covenants are against\nGeorgia public policy. Accordingly, the Court held the trial court did not err\nin refusing to apply the choice of law provision. This decision is curious as\nthe agreement was governed by Delaware law and the Court did not provide any\nexplanation for how application of Delaware law would result in enforcement of\ncovenants that are against Georgia public policy. Importantly, Judge Rickman\nconcurred in judgment only as to the last division of the opinion, so the\nprecedential value of this part of the decision is questionable.<\/p>\n\n\n\n Drafters should carefully consider Belt Power<\/em> when including no-hire\/non-recruitment covenants in agreements that will apply to employees located in Georgia.<\/p>\n","protected":false},"excerpt":{"rendered":" The Georgia Court of Appeals recently issued a decision that has significant implications for drafting and enforcement of restrictive covenants, including non-competes, customer non-solicits and employee non-solicits and non-recruitment provisions. Restrictive Covenant Litigation In Belt Power v. Reed, 2020 WL 1150059 (Ga. App. 2020), the court addressed three key issues that are important to restrictive […]<\/p>\n","protected":false},"author":5,"featured_media":1370,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_mo_disable_npp":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[4,9],"tags":[],"acf":[],"yoast_head":"\n
\n<\/strong>In Belt Power v. Reed<\/em>, 2020 WL 1150059 (Ga. App. 2020), the court\naddressed three key issues that are important to restrictive covenant\nlitigation: (1) whether Georgia\u2019s Restrictive Covenant Act (the \u201cRCA\u201d) applies\nto no-hire and employee non-solicitation covenants; (2) whether blue-penciling\nunder the Act is permissive, not mandatory; and (3) whether a choice-of-law\nprovision choosing the law of another state will still be disregarded if\napplying the provision would result in enforcement of covenants that are\nconsidered to be against Georgia public policy. <\/p>\n\n\n\n