Much has been written about the Restrictive Covenants Act (the \u201cAct\u201d) passed by the Georgia General Assembly during the 2009 legislative session.[4]\u00a0 However, before the new legislation becomes effective, an amendment to the Georgia Constitution must be approved in a statewide referendum in the upcoming general election.[5]\u00a0 While most commentators appear to review the legislation favorably, before the electorate votes on the enabling referendum this November, we should explore in more depth whether this legislation truly is good for business in Georgia and whether its stated goals can be accomplished.<\/p>\n
One of the stated purposes of the Act is to \u201cbring Georgia in line with the overwhelming majority of other states and to establish a rule of reasonableness and legal analysis of these agreements.\u201d[6]\u00a0 According to the sponsors of the bill, the purpose of the legislation is also to make the outcomes of enforcement of non-compete agreements more predictable, to decrease litigation in this arena, to provide employers with greater protection and to make Georgia more like other states.[7]\u00a0 In passing the Act, the General Assembly found that \u201creasonable restrictive covenants contained in employment and commercial contracts serve the legitimate purpose of protecting legitimate business interests and creating an environment that is favorable to attracting commercial enterprises to Georgia and keeping existing businesses within the state.\u201d[8]\u00a0 The purpose of this article is to examine whether these stated goals are in the best interest of business in Georgia and whether the legislation can accomplish them.[9]<\/p>\n
The Current State of the Law<\/strong><\/p>\n Any discussion of Georgia state non-competes would be incomplete without some background on the existing law and its origins.\u00a0 The law as it exists today is rooted in Georgia\u2019s Constitution, which states that all contracts that have the effect of or are intended to defeat or lessen competition or encourage a monopoly are illegal and void.[10]\u00a0 It is under this provision of the Georgia Constitution that a line of case law has developed over the last one hundred or so years, most of which is hostile to restrictive covenants in the employment context.\u00a0 Since the late 1800s, the Georgia courts have held that restrictive covenants in employment contracts are considered to be in partial restraint of trade and, therefore, must be carefully scrutinized.<\/p>\n The rationale for much of the historic hostility exhibited by the Georgia courts toward non-competes in the employment context can be found in the Rakestraw v. Lanier<\/em> decision, in which the Supreme Court of Georgia held that<\/p>\n \u201ccontracts in unreasonable restraint of trade are contrary to public policy, and void, because they tend to injure the parties making them; diminish their means of procuring livelihoods and a competency for their families; tempt improvident persons, for the sake of present gain, to deprive themselves of the power to make future acquisitions, and expose them to imposition and oppression; tend to deprive the public of the services of [citizens] in the employments and capacities in which they may be most useful to the community as well as to themselves; discourage industry and enterprise, and diminish the products of ingenuity and skill; prevent competition, and enhance prices, and expose the public to all the evils of monopoly.\u201d[11]<\/p>\n While this decision is more than one hundred years old, the underlying premise has not changed.\u00a0 Few employees today have any negotiating leverage concerning the terms of the restrictive covenants which they are asked to sign, much less any say in whether to sign the covenants.\u00a0 In fact, most employees are presented with non-competes on their first day of work (after they have left their prior employment and, as is often the case, after they have moved their families to a new state or locale).\u00a0 As such, they are classic contracts of adhesion.\u00a0 This lack of negotiating power is another significant factor in the Georgia courts\u2019 hostility toward these types of agreements.[12]<\/p>\n A comprehensive discussion of the present state of the law in Georgia concerning non-competes in the employment context is beyond the scope of this article.\u00a0 However, in a nutshell, the courts in Georgia have traditionally enforced restrictive covenants ancillary to employment only if the restraints are not unreasonable, are founded on valuable consideration, are reasonably necessary to protect the interests of the employer, and do not unduly prejudice the public interest.[13]\u00a0 The Georgia courts use a three-pronged test \u201cas a helpful tool\u201d to determine the reasonableness (and thus, the enforceability) of covenants ancillary to employment contracts.\u00a0 The covenants must be reasonably limited in terms of: (1) the length of time during which they bind the employee; (2) the scope of the conduct that is prohibited; and (3) the geographical territory inside which the employee is bound.[14]<\/p>\n Importantly, Georgia does not allow \u201cblue penciling\u201d or judicial modification of restrictive covenants in the employment context.\u00a0 That is, if a restrictive covenant is not reasonably limited in time, scope or geographical territory, a court may not strike portions of it or re-write the restriction to make it reasonable.<\/p>\n For the experienced practitioner, following the rules which have developed from the \u201cthree-pronged test\u201d is not particularly difficult.\u00a0 While the rules that have developed certainly limit the type and scope of restrictions that employers can obtain from their employees, the rules are relatively easy to follow, if one knows them.\u00a0 Of course, reasonable minds can differ on this point, as evidenced by Justice Jordan\u2019s dissent in the 1977 decision of Fuller v. Kolb<\/em>.[15]\u00a0 In response to the majority\u2019s decision striking down a non-compete clause, Justice Jordan wrote that \u201cten Philadelphia lawyers could not draft an employer-employee restrictive covenant agreement that would pass muster under the recent rulings of this court.\u201d[16]<\/p>\n Under the Act, courts will be permitted to both \u201cblue pencil\u201d restrictive covenants in employment agreements by \u201ccrossing out\u201d overly broad terms and to judicially modify overly broad restrictive covenants to grant relief which the court determines is reasonably necessary to protect the employer\u2019s interest and to achieve the intent of the contracting parties.\u00a0 This means a court will be permitted to completely rewrite a non-compete agreement, if necessary, potentially substituting what the court thinks is reasonable for what the parties agreed.<\/p>\n Will the New Legislation Make Georgia More Economically Competitive?<\/strong><\/p>\n The referendum that would amend the Georgia Constitution and remove the constitutional barriers to the Act will ask voters: \u201cShall the Constitution of Georgia be amended so as to make Georgia more economically competitive by authorizing legislation to uphold reasonable competitive agreements?\u201d[17] However, it is not entirely clear that the Act will make Georgia more economically competitive.<\/p>\n Proponents of the Act believe that companies are reluctant to open offices here or locate their headquarters here because of their concerns about their ability to restrict their employees from leaving and joining competitors under the present state of the law in Georgia.\u00a0 While this certainly may be a concern expressed by some companies, it is unclear whether this is a view held by a majority of businesses.\u00a0 Georgia has had great success in attracting companies from all over the country and the world and most of the companies in the Fortune 500 have offices or some other significant presence here.<\/p>\n Moreover, according to one study, strict enforcement of non-compete covenants may not be best for all businesses. [18]\u00a0 Researchers at the University of Iowa have concluded that while strict enforcement is advantageous for companies in emerging industries, as an industry develops and competition increases, it becomes less advantageous for companies to locate in jurisdictions with laws strongly favoring the enforceability of non-competes.[19]\u00a0 In fact, according to this study, Massachusetts\u2019 liberal enforcement of non-competes in the employment context is one reason why Massachusetts has lagged behind California\u2019s Silicon Valley in attracting and growing technology companies. [20]<\/p>\n It goes without saying that in California, a state where non-competes are strictly prohibited in the employment context, high-tech businesses have thrived.[21]\u00a0 One would think Georgia would like to have a\u00a0 technology industry on par with the one in Silicon Valley.\u00a0 Even the Georgia Chamber of Commerce, a vigorous proponent of the new legislation, would probably agree that Georgia would like to attract and incubate the next Microsoft, Google or Apple.\u00a0 If this study is correct, the new legislation may very well set Georgia back in its efforts to attract high-paying, information-technology jobs, rather than move the state forward.<\/p>\n Will Outcomes be More Predictable?<\/strong><\/p>\n Despite the contrary opinions referenced above, under the current law in Georgia, the validity of restrictive covenants in the employment context is reasonably predictable.\u00a0 Georgia courts will generally enforce a non-compete if: (1) it covers only the territory in which the employee has worked for, or represented, the employer during his or her employment; (2) the scope of the prohibition is rationally related to the activities performed by the employee during his or her employment, and (3) the duration of the restraint is not unreasonable.[22]\u00a0 Moreover, Georgia courts will generally enforce a customer non-solicitation provision if it is limited to the customers with whom the employee had contact during employment, even in the absence of a territorial restriction.[23]\u00a0 The Georgia courts will also generally enforce non-disclosure or confidentiality provisions as long as they have some time limitation that bears some relation to the length of time during which the information can truly be considered confidential.[24]<\/p>\n For experienced drafters and litigators in this arena, the outcomes of non-compete disputes are reasonably predictable, as covenants are typically either enforceable or unenforceable on their face when the rules described above are applied.\u00a0 In fact, under current Georgia law, whether the restraint imposed by a restrictive covenant is reasonable is a question of law for determination by the court.[25]\u00a0 What this means in practice is that the vast majority of non-compete disputes are decided by the judge based on motions, rather than by juries.\u00a0 There probably are not many attorneys who would dispute the fact that outcomes are significantly more predictable when judges are making decisions on legal issues rather than juries rendering verdicts based on the facts, the law and many other factors, including which attorney they like better.<\/p>\n There is no doubt that in a non-compete dispute in a state that allows blue penciling or judicial modification of restrictive covenants, it is predictable the employer will usually obtain some protection from the court, rather than coming away empty-handed as is often the case in Georgia because of poorly drafted restrictive covenants.\u00a0 However, the outcome of a case in a state which allows blue penciling or judicial modification is usually dependent on the particular judge\u2019s outlook on restrictive covenants in the employment context as well as the particular facts of the case (which must be presented in an evidentiary hearing or trial, rather than in a summary fashion such as a motion).[26]\u00a0 Unlike in Georgia, where under the current law the enforceability of a covenant can be predicted with a reasonable degree of certainty at the outset of any dispute, in states in which the courts can blue pencil or modify a covenant, the range of possible outcomes of the dispute is very unpredictable even for the most experienced practitioner.<\/p>\n This unpredictability is exacerbated by the fact that under the new legislation the courts will have the discretion whether to blue pencil or modify the covenant, if it is over broad.\u00a0 Without any guidance as to when and how the courts are required to exercise this discretion, it is impossible to predict how the courts will make this determination.<\/p>\n In sum, while the new legislation will certainly make it more predictable that employers will likely obtain some protection from the Georgia courts when they find the need to enforce restrictive covenants against former employees, the scope of that protection, and how any individual judge will rule, will become far more difficult to predict.\u00a0 This loss of predictability for the employer (and the employee) is another downside to the Act.<\/p>\n Will the Act Decrease Litigation?<\/strong><\/p>\n The new legislation is likely to decrease litigation by deterring most employees from challenging restrictive covenants entered into in conjunction with their employment.\u00a0 Employees will be less likely to challenge even overly broad restrictive covenants if they cannot reasonably predict how a judge will rule with respect to the covenants and if doing so will require time-consuming and expensive discovery, as well as a trial.<\/p>\n Nevertheless, rather than decrease the time and cost of litigation which does take place, the legislation will likely result in significantly more protracted litigation when a lawsuit is filed.\u00a0 Currently, the majority of lawsuits in Georgia in this arena are short-lived because the court will usually be afforded the opportunity to rule as to the enforceability of the covenant early in the litigation.\u00a0 Most often, this ruling is made based on the wording of the covenant without the need for expensive discovery and evidentiary hearings or trials.\u00a0 In addition, when a covenant is found to be unenforceable, the case is usually resolved by the parties quickly.\u00a0 When a covenant is found to be enforceable, the case also tends to be resolved promptly because the employee (and often his or her new employer) will not want to risk the possibility of a judgment for damages.<\/p>\n Thus, when significant discovery and a full evidentiary hearing are necessary to litigate the reasonableness of the territory and\/or the scope of the activities that are restricted, the time and expense necessary to determine whether a covenant is enforceable will expand greatly.[27]\u00a0 Evidentiary hearings or trials will also be necessary to determine if an employee has the \u201cspecialized knowledge and training\u201d which is necessary under the Act for a non-compete to be enforced against him or her.\u00a0 The same will be true for the \u201ceconomic hardship\u201d exception that is part of the Act.<\/p>\n In fact, a closer look at this \u201ceconomic hardship\u201d exception demonstrates not only how much the Act will expand litigation in this arena, but also how unpredictable outcomes will become under the Act.\u00a0 If a former employee asserts the \u201ceconomic hardship\u201d defense to a claim by his former employer to enforce a restrictive covenant against him, will this open up all of that person\u2019s finances to scrutiny in the case?\u00a0 Certainly if a former employee is going to claim \u201ceconomic hardship\u201d as a defense, the former employer will have to be permitted to explore all of the facts which could impact the court\u2019s decision whether to not enforce a covenant against a former employee on that basis. Does this mean that when representing employers and a former employee raises this defense, we will be able to conduct discovery into every aspect of the employee\u2019s finances, including, for example, his savings, his investments, the value of and equity in his house, the number of big screen televisions he has in his basement and the number and luxuriousness of the vacations he has taken?\u00a0 To take it step further, will we be permitted to learn how an individual has been spending his money up to that point and determine whether the individual has been spending lavishly and living above his means?\u00a0 Will we now need experts to review the former employee\u2019s finances and spending habits to determine if the employee truly can claim \u201ceconomic hardship\u201d or to testify that if the former employee had been more prudent with the money he earned, he would not suffer an \u201ceconomic hardship\u201d by having the covenants enforced against him.\u00a0 Will the courts have to now sit in judgment of how an individual spent his earnings and make the subjective determination as to whether the individual is worthy of the \u201ceconomic hardship\u201d defense?\u00a0 Needless to say, this is just a sampling of the types of issues that will be litigated under the Act.<\/p>\n In sum, any decrease in the number of lawsuits concerning restrictive covenants caused by the new legislation may be offset by the expanded nature and expense of those lawsuits which are filed.<\/p>\n Is the Uniformity Sought by the New Legislation Illusory?<\/strong><\/p>\n The goal of uniformity, announced as one policy goal of the new legislation, may be an illusory one.\u00a0 Whether courts may blue-pencil or judicially modify restrictive covenants in the employment context varies widely throughout the United States.<\/p>\n As stated above, California outright prohibits non-compete agreements in the employment context.[28]\u00a0\u00a0 Whether employment or continued employment is sufficient consideration for restrictive covenants also varies greatly. Unlike in some other states, in Georgia, employment or continued employment is sufficient consideration for restrictive covenants in the employment context.[29]\u00a0\u00a0 In fact, in this regard, Georgia is one of the more employer-friendly states in the country.\u00a0 For example, in courts in California, Texas, Montana, North Carolina and South Carolina, among others, mere employment or continued employment is not sufficient consideration for restrictive covenants in the employment context.\u00a0 Something else of value must be provided to the employee.[30]\u00a0 In Texas, a non-compete is enforceable only if it is ancillary to an \u201cotherwise enforceable agreement.\u201d[31]\u00a0 This means that a restrictive covenant cannot be simply ancillary to employment or continued employment, but must attach to another agreement that is otherwise enforceable between the employer and the employee (for example, an agreement concerning the employer providing specific training or specific confidential information or trade secrets to the employee).[32]\u00a0\u00a0 Therefore, it is not entirely clear that the legislation will make Georgia\u2019s non-compete law more like other states\u2019 laws.\u00a0 Indeed, given the wide variation in restrictive covenant laws in the United States, uniformity is probably an illusory goal.<\/p>\n Importantly, the Georgia Legislature seems to be heading in the opposite direction from other states that are looking at this issue.\u00a0 For example, Oregon recently passed legislation limiting the use of restrictive covenant agreements in the employment context.[33]\u00a0 Moreover, in Massachusetts, legislation is being considered that would prescribe more specific requirements in order for restrictive covenants in the employment context to be enforced in that state.[34]\u00a0 It is unclear why the Georgia legislature has chosen to go in a different direction at this time.<\/p>\n What Impact Will the Act Have on Employees?<\/strong><\/p>\n It is particularly curious that our legislature would pass a law of this nature given the current state of the economy.\u00a0 Recent unemployment statistics place Georgia\u2019s unemployment rate at ten percent, with over 450,000 Georgians out of work.[35]\u00a0 For those who are subject to restrictive covenants, the job market will be especially bleak.\u00a0 Overly broad restrictive covenants can have a chilling effect on former employees who may not know that the agreements they signed are unenforceable.\u00a0 This will also certainly make it more difficult for companies to recruit employees for their companies.[36]<\/p>\n Moreover, by allowing judicial modification, the new legislation will encourage employers to draft extremely broad restrictive covenants, comfortable in the knowledge that if the enforceability of those covenants is ever challenged, the worst consequence is that a judge will enforce something more reasonable.\u00a0 From an employer\u2019s perspective, if the referendum passes, there will no longer be an incentive to draft reasonably-tailored covenants from the outset, because employees will likely abide by the covenant\u2019s overly restrictive terms without questioning its enforceability and, if not, the courts will enforce what they determine to be reasonable.<\/p>\n Georgia\u2019s Supreme Court addressed this issue in 1983, explaining that allowing courts to excise the objectionable portions of restrictive covenants could result in the \u201cin terrorem<\/em> effect\u201d on employees who cannot or will not challenge their covenants.\u00a0 Citing a Harvard Law Review article, Justice Bell explained that<\/p>\n \u201cCourts and writers have engaged in hot debate over whether severance should ever be applied to an employee restraint.\u00a0 The argument against doing so is persuasive.\u00a0 For every covenant that finds its way to court, there are thousands which exercise an in terrorem effect on employees who respect their contractual obligations and on competitors who fear legal complications if they employ a covenantor, or who are anxious to maintain gentlemanly relations with their competitors.\u00a0 Thus, the mobility of untold numbers of employees is restricted by the intimidation of restrictions whose severity no court would sanction.\u00a0 If severance is generally applied, employers can fashion truly ominous covenants with confidence that they will be pared down and enforced when the facts of a particular case are not unreasonable.\u00a0 This smacks of having one\u2019s employee\u2019s cake, and eating it too.\u201d[37]<\/p>\n One has to question whether the legislature truly considered the impact of this legislation on Georgia\u2019s workers, who are enduring the worst recession since World War II, before it hastily passed the law.<\/p>\n Conclusion<\/strong><\/p>\n It is difficult to dispute that Georgia law needs to provide greater protections for employers.\u00a0 For example, the territorial restrictions that are now permitted must be expanded to address the realities of the modern business world.\u00a0 Companies with national or international operations, have an interest in enforcing nationwide (or greater) non-competes against employees such as executives or salespersons who have responsibility for the operations or customer relationships on a nationwide basis.\u00a0 To date, however, Georgia courts have been unwilling to enforce a nationwide non-compete.[38] \u00a0Moreover, the prohibition against restrictions that prohibit the acceptance of unsolicited business makes it extraordinarily difficult for companies to rely solely on a non-solicitation provision rather than using a non-compete.\u00a0 In other words, if employers were permitted to prohibit employees not only from soliciting business from customers with whom they had contact, but also from doing business with those customers even when the business is unsolicited, employers would be more likely to rely on non-solicitation provisions and the need for non-competes would be reduced.<\/p>\n In summary, there is no question that the law in Georgia needs to be modernized to allow employers greater protections, when appropriate.\u00a0 However, the new legislation seems to go well beyond what is necessary to accomplish this goal.\u00a0 The new legislation also runs contrary to a trend taking hold in other states with which Georgia would like to compete.\u00a0 In Massachusetts, the legislature is very carefully studying the issue before acting.\u00a0 While the Georgia legislature purports to have done so, it does not appear to these observers that the Georgia legislature has even scratched the surface of the various perspectives that should be considered, or that it spent the time and energy necessary to truly determine what is best for business in Georgia.<\/p>\n \u00a0<\/em><\/p>\n This article is intended for general informational purposes only.\u00a0 The article is not intended to constitute, and does not constitute, legal advice.<\/em><\/p>\n <\/p>\n [4] H.B. 173, 150th Leg., Reg. Sess. (Ga. 2009). See, e.g., Erika Birg, Michael Elkon and Erin McPhail Wetty, Georgia Gets Competitive, GEORGIA BAR JOURNAL, December 2009; J. Matthew Maguire, Jr. and Geremy W. Gregory, The New Restrictive Covenants Act: Sloppy Draftsmanship May Soon Be Forgiven, THE LITIGATOR (Litigation Section of the Atlanta Bar Association, Atlanta, Georgia), December 2009.<\/p>\n [5] The reason for this, as explained below, is that Georgia\u2019s hostility to restrictive covenants in the employment context is rooted in the state\u2019s Constitution.\u00a0 Therefore, absent a Constitutional amendment, the Act would likely be declared unconstitutional.\u00a0 Previous legislation attempting to reform the Georgia state non-compete law was struck down on this basis.\u00a0 Specifically, a Restrictive Covenant Act was passed in 1990 by the Georgia legislature in a previous attempt to codify this area of the law.\u00a0 This statute was declared unconstitutional by the Georgia Supreme Court the following year.\u00a0 See Jackson & Coker, Inc. v. Hart<\/em>, 261 Ga. 371, 372, 405 S.E.2d 253, 255 (1991) (criticizing the 1990 Restrictive Covenant Act as the legislature\u2019s effort to \u201cbreathe life into contracts otherwise plainly void\u201d).<\/p>\n [6] Restrictive Covenants in the Commercial Arena, Study Committee Final Report at page 3.<\/p>\n [7] H.B. 173, 150th Leg., Reg. Sess. (Ga. 2009).<\/p>\n [8] Id<\/em>.<\/p>\n [9] Although many may view this issue as one that pits employers against employees that is not an entirely accurate perception of the debate.\u00a0 Many employers use Georgia\u2019s strict non-compete law to their advantage when hiring employees from their competitors.\u00a0 See, e.g., Paramount Tax & Accounting, LLC v. H & R Block E. Enterprises, Inc.<\/em>, 299 Ga. App. 596, 683 S.E.2d 141 (2009); Enron Capital & Trade Res. Corp. v. Pokalsky<\/em>, 227 Ga. App. 727, 490 S.E.2d 136 (1997).<\/p>\n [10] Ga. Const. art. III, \u00a7 6, para. 5; see also<\/em> O.C.G.A. \u00a7 13-8-2(a) (providing that contracts deemed contrary to public policy will not be enforced).<\/p>\n [11] 104 Ga. 188, 30 S.E.2d, 735, 738 (1898).<\/p>\n [12] See generally<\/em>, Johnstone v. Tom\u2019s Amusement Co., Inc.<\/em>, 228 Ga. App. 296, 299, 491 S.E.2d 394, 398 (1997) (quoting<\/em> Watson v. Waffle House, Inc<\/em>., 253 Ga. 671, 672, 324 S.E.2d 175, 177 (1985) and<\/em> White v. Fletcher\/Mayo\/Associates, Inc.<\/em>, 251 Ga. 203, 207, 303 S.E.2d 746, 750 (1983)).<\/p>\n [13] See generally, id.<\/em><\/p>\n [14]\u00a0 Watson<\/em>, 253 Ga. at 673, 324 S.E.2d at 178; Howard Schultz & Assocs. of the Southeast, Inc. v. Broniec<\/em>, 239 Ga. 181, 183, 236 S.E.2d 265, 267 (1977).<\/p>\n [15] 238 Ga. 602, 234 S.E.2d 517 (1977).<\/p>\n [16] Id. <\/em>at 605, 234 S.E.2d at 518 (Jordan, J., dissenting); see<\/em> also<\/em> Michael Elkon, Georgia\u2019s New Non-Compete Statute and its Potential Effect on Technology Companies<\/em>, Georgia Journal of Technology Law (Technology Law Section of the State Bar of Georgia, Atlanta, Georgia), June 5, 2009 (\u201cGeorgia law is hostile to these covenants, but not in an explicit way like, say, California or North Dakota, which have an outright prohibition on non-competes (with limited exceptions).\u00a0 Instead, Georgia has a dense thicket of cases that create a series of traps for companies seeking to enforce restrictive covenants.\u00a0 Georgia common law has evolved over decades to create a bevy of bushes, branches, and fallen logs over and around which employers must navigate to enforce non-competes and other restrictive covenants.\u201d)<\/p>\n [17] H.R. Res. 178, 151st Leg. (Ga. 2010).\u00a0 One writer has referred to this wording as \u201cpatently deceptive and unconscionable.\u201d\u00a0 See<\/em> Howard Johnson, Legalized Restraint of Trade Raises its Ugly Head Again in Ga., <\/em>Fulton County Daily Report, June 10, 2010.\u00a0 While these may be strong words, it is hard to believe that this wording is the most accurate description of the nature of the legislation to be considered by the voters.<\/p>\n [18] See<\/em> April Franco and Matthew Mitchell, Covenants Not to Compete, Labor Mobility, and Industry Dynamics<\/em> 44-46 (Mar. 21, 2005) (unpublished manuscript, on file with authors) (available at www.lse.ac.uk\/collections\/RICAFE\/pdf\/Franco_April.pdf); see also<\/em> Study: Non-Compete Clauses Hurt Route 128 Growth<\/em>, THE BOSTON GLOBE, August 20, 2008; Posting of Michael Rosen, Recent Events Provide More Fodder for Debate About Noncompetes in Massachusetts<\/em>, to http:\/\/www.massachusetts.com noncompetelaw.com\/2008\/09\/articles\/noncompete-debate\/recent-events-provide-more-fodder-for-debate-about-noncompetes-in-massachusetts\/<\/span> (Sept. 2, 2008).<\/p>\n [19] Id.<\/em><\/p>\n [20] Id.<\/em><\/p>\n [21] See Hollingsworth Solderless Terminal Co. v. Turley<\/em>, 622 F.2d 1324, 1338 (9th Cir. 1980); Cal. Bus. & Prof. Code \u00a7 16600 (\u201cExcept as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void\u201d).<\/p>\n [22] See Watson<\/em>, 253 Ga. at 673, 324 S.E.2d at 178; Howard Schultz & Assocs. of the Southeast, Inc. v. Broniec<\/em>, 239 Ga. 181, 183, 236 S.E.2d 265, 267 (1977).<\/p>\n [23] See W.R. Grace & Co., v. Mouyal<\/em>, 262 Ga. 464, 467, 422 S.E.2d 529, 533 (1992).<\/p>\n [24] See Sunstates Refrigerated Servs., Inc. v. Griffin<\/em>, 215 Ga. App. 61, 449 S.E.2d 858 (1994).<\/p>\n [25] See<\/em> Allied Informatics, Inc. v. Yeruva<\/em>, 251 Ga. App. 404, 406, 554 S.E.2d 550, 553 (2001); Osta v. Moran<\/em>, 208 Ga. App. 544, 546, 430 S.E.2d 837, 839 (1993).\u00a0 See also<\/em> Ken\u2019s Stereo Video Junction, Inc. v. Plotner<\/em>, 253 Ga. App. 811, 813, 560 S.E.2d 708, 710 (2002) (affirming the trial court\u2019s decision not to hold an evidentiary hearing, as \u201cone was not required\u201d where \u201crestriction imposed . . . could not be saved by additional facts and [wa]s in fact void on its face\u201d); AGA, LLC v. Reuben<\/em>, 243 Ga. App. 772, 774, 533 S.E.2d 804, 806 (2000) (\u201c[u]sually, whether a covenant is reasonable can appropriately be answered based upon the wording of the covenant\u201d).<\/p>\n [26] As attorney Cary Ichter aptly stated, \u201c[w]ere one to take a dozen superior court judges and have each of them rewrite a non-competition covenant based upon all of these considerations \u2013 and others some might consider \u2013 it would be fair to anticipate that one would wind up with 12 very different contracts at the end of the process.\u201d\u00a0 Cary Ichter, Blue-Penciling Makes Non-Compete Law Bad for Georgia<\/em>, FULTON COUNTY DAILY REPORT, June 25, 2010.<\/p>\n [27] The possibility that the law will increase litigation in the area of non-competes is acknowledged even by commentators who have expressed support for the legislation.\u00a0 See, e.g., <\/em>J. Matthew Maguire, Jr. and Geremy W. Gregory, The New Restrictive Covenants Act: Sloppy Draftsmanship May Soon Be Forgiven<\/em>, The Litigator (Litigation Section of the Atlanta Bar Association, Atlanta, Georgia), December 2009, at page 3 (\u201cAct 64 may have the unintended effects [sic] of increasing litigation in this area and casting the ultimate responsibility for drafting enforceable restrictive covenants on the courts.\u201d).<\/p>\n [28] See Hollingsworth Solderless Terminal Co. v. Turley<\/em>, 622 F.2d 1324, 1338 (9th Cir. 1980).<\/p>\n [29] See Thomas v. Coastal Indus. Services, Inc.<\/em>, 214 Ga. 832, 108 S.E.2d 328, 329 (1959).<\/p>\n [30] In fourteen states, continued employment does not constitute sufficient consideration for restrictive covenants in the employment context.\u00a0 In twenty-two states, including Georgia, Massachusetts, Nebraska, New Jersey and Ohio, continued employment is sufficient consideration.\u00a0 In thirteen states and the District of Columbia, the issue is undecided.\u00a0<\/strong><\/p>\n [31] Tex. Bus. & Com. Code \u00a7 15.50(a).<\/p>\n [32] See Light v. Centel Cellular Co. of Texas<\/em>, 883 S.W.2d 642, 646 (Tex. 1994).<\/p>\n [33] See <\/em>Or. Rev. Stat. Ann. \u00a7 653.295 (West).<\/p>\n [34] See <\/em>H.R. 4607, 186th Gen. Court, Reg. Sess. (Mass. 2010).<\/p>\n [35] Georgia Labor Force Estimates<\/em> (Georgia Department of Labor), June 2010.<\/p>\n [36] A positive aspect of the Act is that it does expressly prohibit non-competes for certain, lower-level workers.\u00a0 See <\/em>H.B. 173, 150th Leg., Reg. Sess. (Ga. 2009).<\/p>\n [37] White<\/em>, 251 Ga. at 207, 303 S.E.2d at 751 (quoting<\/em> Harlan M. Blake, Employee Agreements Not to Compete<\/em>, 73 Harv.L.Rev. 625, 682-83 (1960)).<\/p>\n [38] See, e.g., American Software USA, Inc. v. Moore<\/em>, 264 Ga. 480, 483, 448 S.E.2d 206, 209 (1994) (declaring a restrictive covenant with a nationwide territorial restriction to be overly broad and unenforceable).<\/p>\n","protected":false},"excerpt":{"rendered":" Much has been written about the Restrictive Covenants Act (the \u201cAct\u201d) passed by the Georgia General Assembly during the 2009 legislative session.[4]\u00a0 However, before the new legislation becomes effective, an amendment to the Georgia Constitution must be approved in a statewide referendum in the upcoming general election.[5]\u00a0 While most commentators appear to review the legislation […]<\/p>\n","protected":false},"author":4,"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":[67,20,25,22],"acf":[],"yoast_head":"\n
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