When Is a Non-Compete or Non-Solicitation Agreement Unenforceable?

When you take a new job or are promoted to a higher position, you may be asked to sign an agreement promising not to compete with your new employer or solicit its customers once your employment ends. The restrictions in these agreements are open to interpretation by employees, employers and courts. Because of this, there may be legal limits on their enforceability.

In Georgia, these agreements are generally legal thanks to a 2011 statute called the Restrictive Covenant Act (RCA). The RCA eased prior limits on non-compete and non-solicitation agreements in these ways:

• Allowing courts to modify overly broad provisions — Courts may amend or re-write overly broad non-compete or non-solicitation provisions (often referred to as restrictive covenants) by removing a part of the provision that would make the entire covenant unenforceable. However, the court cannot add or alter the terms of the restrictive covenant provisions.
• Establishing presumptively reasonable time limits — Non-compete and non-solicitation agreements must have reasonable time limits. For example, employers can enforce a non-compete or non-solicitation agreement against you for two years after termination of your employment. However, a three-year time limit would be considered presumptively unreasonable, making the contractual provision unenforceable.
• Broadening the reach of non-solicitation provisions — The RCA extends the restrictive covenant to include not only customers with whom you had actual contact but also customers with whom you exchanged confidential information or from whom you received earnings, compensation or commission during the two years before your termination.

Even though the RCA made non-compete and non-solicitation agreements generally enforceable, certain drafting flaws can make an agreement partially or completely void. Here are some examples:

• Failing to include a geographic restriction, which is material to the agreement
• Failing to explain the ways in which a former employee may not encourage an employee of the former employer to quit their job or may not otherwise “interfere” with the employer-employee relationship
• Failing to require a certain level of interaction between the former employee and a customer

If you’re working under an employment agreement containing non-compete or non-solicitation provisions in Georgia, you may wonder if your agreement is legally binding. However, don’t make any assumptions without first consulting with a qualified labor and employment lawyer.

The Reddy Law Firm, P.C. in Suwanee has years of experience in drafting, negotiating, enforcing and litigating employment contracts for clients across Georgia. To schedule a free attorney consultation, contact us online or call us at 678-629-3246 today.