{"id":476,"date":"2013-05-15T15:38:57","date_gmt":"2013-05-15T15:38:57","guid":{"rendered":"https:\/\/www.bfvlaw.com\/georgia-supreme-court-mentions-effective-date-of-new-restrictive-covenants-act\/"},"modified":"2013-05-15T15:38:57","modified_gmt":"2013-05-15T15:38:57","slug":"georgia-supreme-court-mentions-effective-date-of-new-restrictive-covenants-act","status":"publish","type":"post","link":"https:\/\/www.bfvlaw.com\/georgia-supreme-court-mentions-effective-date-of-new-restrictive-covenants-act\/","title":{"rendered":"Georgia Supreme Court Mentions Effective Date of New Restrictive Covenants Act"},"content":{"rendered":"<p>Much has been written about the issues surrounding when Georgia\u2019s new restrictive covenants law took effect.\u00a0<span>House Bill 173 was intended to take effect on November 3, 2010, the day following ratification of an amendment to Georgia\u2019s Constitution which allowed Georgia\u2019s General Assembly to legislate more freely in the area of restrictive covenants.\u00a0 However, because the amendment did not actually take effect until January 1, 2011, questions arose about the validity of House Bill 173.\u00a0 Based on these concerns, the General Assembly passed House Bill 30.\u00a0 House Bill 30 substantially reenacted House Bill 173 and took effect on May 11, 2011.\u00a0 By its terms House Bill 30 only applies to restrictive covenants entered into on or after its effective date.\u00a0<\/span><\/p>\n<p>While House Bill 30 thus clearly governs covenants entered into after May 11, 2011, the question of what law governs restrictive covenants entered into between November 3, 2010 and May 11, 2011 is unclear.\u00a0 An unpublished opinion from the Eleventh Circuit found that House Bill 173 was void <em>ab initio<\/em> and that Georgia\u2019s historical common law governs restrictive covenants entered into prior to May 11, 2011.\u00a0 <em>See<\/em> <em>Becham v. Synthes USA<\/em>, 2012 WL 1994604 (11th Cir. June 4, 2012).\u00a0 While potentially persuasive, <em>Becham <\/em>is not binding on Georgia trial courts.\u00a0 To date, no Georgia appellate court has ruled on what law governs the enforceability of restrictive covenants entered into between November 4, 2010 and May 11, 2011.<\/p>\n<p>In <em>Holton v. Physician Oncology Services, LP<\/em>, \u2013\u00a0 S.E.2d \u2013, 2013 WL 1859294 (Ga. May 6, 2013), the Georgia Supreme Court considered a challenge to the validity of an injunction based on a non-disclosure covenant in an employment agreement entered into in August 2009.\u00a0 The Supreme Court gratuitously commented in a footnote that if the covenant was overbroad, it could not be blue-penciled under Georgia\u2019s new law: \u201cThe 2011 act revising the law related to restrictive covenants in contracts does not apply to contracts entered into before May 11, 2011.\u00a0 <em>See<\/em> Ga. L.2011, p. 399, \u00a7 5. Therefore, the act\u2019s provision on judicial modification of restrictive covenants does not apply here. See O.C.G.A. \u00a7 13\u20138\u201354(b).\u201d<\/p>\n<p>On its face this comment might suggest that the Supreme Court agrees with the Eleventh Circuit\u2019s holding in <em>Becham<\/em> that Georgia law did not change until May 11, 2011.\u00a0 A closer examination of the Supreme Court\u2019s wording, however, suggests that Georgia\u2019s highest court did not answer the question of when Georgia restrictive covenants law officially changed.\u00a0 More specifically, the Supreme Court\u2019s footnote in <em>Holton<\/em> refers to the \u201c2011 act.\u201d\u00a0 House Bill 30 is the \u201c2011 act\u201d, and there is no dispute that House Bill 30 applies to covenants entered into on or after May 11, 2011.\u00a0 In contrast, House Bill 173 is a \u201c2009 act.\u201d\u00a0 The Supreme Court\u2019s choice of words (i.e., its use of the phrase \u201c2011 act\u201d) thus leaves open the possibility that House Bill 173 could apply to restrictive covenants entered into between November 3, 2011 and May 10, 2011 (or between January 1, 2011 and May 10, 2011).<\/p>\n<p>Furthermore, the employment agreement at issue in <em>Holton<\/em> was signed in August 2009.\u00a0 Thus, even if the Supreme Court was opining in <em>Holton<\/em> on whether Georgia\u2019s restrictive covenants law changed on November 3, 2010, January 1, 2011 or May 11, 2011 (which it appears it was not anyway), its ruling would still be <em>dicta<\/em>.<\/p>\n<p>Notwithstanding the fact that <em>Holton<\/em> thus probably does not provide practitioners with much additional guidance on what law applies to restrictive covenants entered into between November 3, 2010 and May 11, 2011, it is still noteworthy that Georgia\u2019s highest court commented on the new law.\u00a0 Of course, it is possible that trial courts will interpret the Supreme Court\u2019s footnote in <em>Holton<\/em> as indicating that it agrees with or would agree with the analysis in <em>Becham<\/em>.\u00a0 Time will tell how the Georgia Supreme Court\u2019s footnote is interpreted and what in fact was meant.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Much has been written about the issues surrounding when Georgia\u2019s new restrictive covenants law took effect.\u00a0House Bill 173 was intended to take effect on November 3, 2010, the day following ratification of an amendment to Georgia\u2019s Constitution which allowed Georgia\u2019s General Assembly to legislate more freely in the area of restrictive covenants.\u00a0 However, because the [&hellip;]<\/p>\n","protected":false},"author":18,"featured_media":0,"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":[26,25,22],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.5 - 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