The Chapar Firm routinely drafts and edits employment contracts which set forth restrictions on the employee after the employment ends and has also litigated numerous cases implicating the rights of employees who, following voluntary or involuntary departures, begin to work for competitors.
Under current Georgia law, employees generally have the right to bring their own skills to a competitor of a former employer and work freely, as long as those employees do not take the property of their former employer.
Certain limitations on that right are permitted if agreed to by a contract. However, they must be in writing and be limited in duration and geographic scope. The former employee can only be restricted from doing for his or her new employer the type of work that he or she did for the former employer.
Critically, under current law, if an employer attempts to restrict the rights of a former employee to a degree greater than permitted, the entire non-compete fails.
For example, if an employee only worked in two Georgia counties during his or her employment with the former employer, but a noncompete contract says the employee is forbidden to work in the entire state, a court would likely declare the entire agreement unenforceable. That is because under current law, courts do not have the ability to "blue pencil" or enforce the agreement to the extent it would have otherwise been permitted.
The Georgia General Assembly has previously passed laws to make it easier for employers to enforce restraints on competition. However, those efforts have failed because the limits on the employers' rights to do so are contained in the Georgia Constitution itself. The Constitution's prohibition of contacts in "restraint of trade" has been the basis of Georgia's antipathy to anti-competitive agreements.
A new effort to change Georgia's law concerning noncompetition agreements is underway in the form of House Bill 173, passed in 2009. The bill is comprehensive in its scope, and would certainly make it easier for employers to create limits on the rights of former employees to compete. Whether the proposed changes to the law governing no-competes are good policy or not is not within the scope of this article. Employers certainly have an interest in protecting their legitimate interests by restricting certain competitive activities of their former employees, but they also need to be able to hire good experienced people.
If the bill becomes law, employers and employees will have to carefully evaluate the changes. Notably, the legal changes are to be effective only upon a vote in the 2010 General Election to amend the Georgia Constitution:
This Act shall become effective on the day following the ratification at the time of the 2010 general election of an amendment to the Constitution of Georgia providing for the enforcement of covenants in commercial contracts that limit competition and shall apply to contracts entered into on and after such date and shall not apply in actions determining the enforceability of restrictive covenants entered into before such date. If such amendment is not so ratified, then this Act shall stand automatically repealed.
The full text of House Bill 173 is found here.
Employers and employees are urged to seek the advice of counsel with regard to these laws before entering into a no-compete agreement or related restriction such as a non-solicit agreement.