{"id":1627,"date":"2022-03-09T20:01:53","date_gmt":"2022-03-09T20:01:53","guid":{"rendered":"https:\/\/www.bfvlaw.com\/georgias-restrictive-covenant-act-noncompete-geographic-limits\/"},"modified":"2022-07-12T18:06:59","modified_gmt":"2022-07-12T18:06:59","slug":"georgias-restrictive-covenant-act-noncompete-geographic-limits","status":"publish","type":"post","link":"https:\/\/www.bfvlaw.com\/georgias-restrictive-covenant-act-noncompete-geographic-limits\/","title":{"rendered":"Georgia\u2019s Restrictive Covenant Act: Noncompete Geographic Limits"},"content":{"rendered":"

Although Georgia\u2019s Restrictive Covenant Act (RCA) has been in effect for almost 11 years, there are still only a handful decisions from Georgia\u2019s appellate courts interpreting the RCA. However, this week the Georgia Court of Appeals issued a new noncompete decision in American Plumbing Professionals, Inc. v. ServeStar, LLC<\/em>, 2022<\/a> WL 628664 (March 4, 2022).<\/p>\n

This decision squarely addresses what is a valid geographic limitation for a noncompete under Georgia\u2019s Restrictive Covenant Act. \u00a0American Plumbing <\/em>thus provides helpful guidance for both noncompete litigators as well as corporate lawyers who draft restrictive covenant agreements for companies with employees in Georgia.<\/p>\n

A Noncompete Battle in the Plumbing Industry
\n<\/strong>American Plumbing<\/em> involved a dispute between competing plumbing companies.\u00a0 After ServeStar hired several of American Plumbing\u2019s employees, American Plumbing filed suit against both the individuals and ServeStar.\u00a0 American Plumbing claimed the individuals were violating their noncompetes and that ServeStar had engaged in tortious interference by inducing the individuals to violate their noncompetes.<\/p>\n

The Trial Court Holds the Noncompetes Are Unenforceable
\n<\/strong>Early in the case, the trial court ruled that some of the noncompetes at issue were unenforceable.\u00a0 However, the trial court did not address the enforceability of the noncompetes of two former American Plumbing employees who had left ServeStar shortly after joining.<\/p>\n

ServeStar later moved for summary judgment on American Plumbing\u2019s claims for tortious interference.\u00a0 That forced the trial court to adjudicate whether the noncompetes of the two employees who had left ServeStar were enforceable.\u00a0 The reason for this is that if the noncompetes are unenforceable, ServeStar cannot be liable for tortiously interfering with an unenforceable agreement.<\/p>\n

The geographic restriction in the noncompetes was the territory where the employees provided services on behalf of American Plumbing during the last twelve months of their employment.\u00a0 The agreement also included an acknowledgement by the employees that in light of the company-wide nature of the confidential information and business relationships developed and maintained by the employees, the territory where the employees provided services extended throughout those parts of the United States where American Plumbing transacts business.<\/p>\n

The trial court granted summary judgment to ServeStar on the tortious interference claim based on its finding that the vague and defective territory in the noncompetes rendered them unenforceable.<\/p>\n

Geographic Restriction Complies with Georgia\u2019s Restrictive Covenant Act
\n<\/strong>In making its decision, the trial court relied heavily on a 1981 decision, Koger Properties v. Adams-Cates Co.<\/em>, in which the Georgia Supreme Court held that a territorial restriction which cannot be determined until the employee\u2019s termination is too indefinite to be enforced.<\/p>\n

The Georgia Court of Appeals reversed the trial court\u2019s decision. It found that the trial court\u2019s reliance on Koger<\/em> was erroneous given that Koger<\/em> predated Georgia\u2019s Restrictive Covenant Act.<\/p>\n

The Court noted that the RCA expressly states in O.C.G.A. section 13-8-53(c)(2) that a description of a geographic restriction using the phrase \u2018the territory where the employee is working at the time of termination\u2019 or similar language is sufficient if the person or entity bound by the restraint can reasonably determinate the maximum reasonable scope of the restraint at the time of termination.<\/p>\n

In other words, under the RCA, a geographic restriction can be enforced even if the employee cannot determine its maximum reasonable scope until the end of his or her employment.<\/p>\n

ServeStar also argued that the geographic restriction is vague because the \u201cterritory\u201d where the employees provided services was not specific enough. ServeStar argued \u201cterritory\u201d could mean a neighborhood, a city, a county, a state, or a region, and was thus unreasonably ambiguous.<\/p>\n

The Court of Appeals rejected this argument.\u00a0 Instead, it found that the geographic restriction in the noncompetes complied with the language that is specifically sanctioned by the RCA and thus gave the employees\u2019 fair notice of the maximum reasonable scope of their restraints.<\/p>\n

The Geographic Restriction Could Still Be Unreasonable
\n<\/strong>Notably, the Court of Appeals only corrected the trial court\u2019s ruling that the geographic restriction was impermissibly vague.\u00a0 The trial court had not addressed whether the territory was reasonable<\/em> or whether the noncompetes at issue were unenforceable for any other reasons, and the Court of Appeals did not reach those issues.\u00a0 Instead, the Court of Appeals remanded the case to the trial court to consider whether there was any other basis to grant ServeStar summary judgment.<\/p>\n

Noncompete Takeaways
\n<\/strong>American Plumbing<\/em> is a good microcosm of the state of Georgia noncompete law.\u00a0 Even with the RCA in effect almost 11 years, there still exists significant hostility among some trial court judges to enforcing noncompetes, as reflected in the trial court\u2019s decisions in American Plumbing<\/em>.<\/p>\n

But the Georgia Court of Appeals continues to make clear, as it did in Kennedy v. Shave Barber<\/em><\/a>, that trial courts should follow the parameters in Georgia\u2019s Restrictive Covenant Act when determining whether noncompetes are valid and enforceable.<\/p>\n

Of course, the Georgia Court of Appeals is not giving trial courts carte blanche to enforce all noncompetes, as it has found in multiple instances that covenants governed by the RCA are invalid and cannot be enforced (Carle v. CarpetCare<\/em><\/a> and Blair v. Pantera Enterprises Inc.<\/em><\/a>).<\/p>\n

Even in American Plumbing<\/em>, the Court of Appeals deliberately did not reach the question of whether the territory in the noncompete was reasonable. Rather, it simply concluded that the language used was valid under Georgia\u2019s Restrictive Covenant Act and thus did not render the covenant facially void.<\/p>\n

If your company has questions regarding the post-employment noncompete agreements it is using and whether they are valid under Georgia\u2019s Restrictive Covenant Act, please feel free to contact me<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Although Georgia\u2019s Restrictive Covenant Act (RCA) has been in effect for almost 11 years, there are still only a handful decisions from Georgia\u2019s appellate courts interpreting the RCA. However, this week the Georgia Court of Appeals issued a new noncompete decision in American Plumbing Professionals, Inc. v. ServeStar, LLC, 2022 WL 628664 (March 4, 2022). […]<\/p>\n","protected":false},"author":5,"featured_media":13693,"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":"\nGeorgia\u2019s Restrictive Covenant Act: Noncompete Geographic Limits - Berman Fink Van Horn P.C.<\/title>\n<meta name=\"description\" content=\"Although Georgia\u2019s Restrictive Covenant Act (RCA) has been in effect for almost 11 years, there are still only a handful decisions from Georgia\u2019s appellate courts interpreting the RCA.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.bfvlaw.com\/georgias-restrictive-covenant-act-noncompete-geographic-limits\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Georgia\u2019s Restrictive Covenant Act: Noncompete Geographic Limits - 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