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How Does a Non-Compete Clause Help My Business?

Georgia’s state legislature passed a new non-compete law last year. The new law helps employers avoid seeing their best and brightest poached by competitors or losing customers to former employees with businesses that directly compete. The law was inspired by a 2009 court case, Atlanta Bread v. Lupton Smith. That non-compete agreement was invalidated by the Georgia Supreme Court after a franchisee dropped the franchise business and opened a similar company under an independent brand. This violated the franchise’s non-compete agreement, which prohibited the franchisee from opening a similar, competing business within two years of leaving the franchise. The court ruled that the two-year requirement was unreasonable and violated Georgia laws regarding fairness in competition. The new law was designed to ensure that such agreements would be upheld in the future.

Under the new law, as a Georgia employer you are better protected if you have your employees sign a non-compete agreement. Such agreements effectively limit the ability of your best employees to jump ship after you have spent your hard earned money to train them. They are also discouraged from trying to take your clients with them if they leave. On the other hand, if you decide to sell your business, you should be careful to make sure that any non-compete agreement you sign allows you to work in a related industry.

Drafting non-compete agreements that stand up to the scrutiny of the courts is a tricky business. It is vital that you obtain counsel from a qualified Georgia business attorney who understands how to write such agreements so that your business is protected against these potential pitfalls.

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