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Georgia Appeals Court Ruling Clarifies Limits on Non-solicitation Covenants

A non-solicitation agreement prohibits former employees of a company from seeking to lure away the company’s existing clients and from hiring or recruiting the company’s other employees. Georgia’s Restrictive Covenants Act requires that non-solicitation agreements contain reasonable restrictions on the geographic area covered, but there has been some uncertainty about statutory exceptions to the restriction. Now, a state appeals court has resolved the doubt.

The recent ruling, in North American Senior Benefits, LLC v. Wimmer, removes a potential way for former employers to get around the requirement of including a geographic limitation in certain covenants. While the statute exempts from that requirement covenants prohibiting solicitation of customers after the termination of the employment contract, the statute is silent on whether the exception applies to prohibitions on solicitation of the former employer’s employees. These are also known as no-recruitment/no-hiring provisions.

The issue in the case was whether a no-recruitment/no-hiring covenant prohibited Alisha and Ryan Wimmer from soliciting employees of their former employer, North American Senior Benefits, LLC (“NASB”). Georgia’s statewide business court found the covenant to be unenforceable because it does not contain an express geographic limitation in scope. The Georgia Court of Appeals agreed, holding that because the state legislature did not set out an exception for restriction on solicitation of a former employer’s employees, it was not within the court’s purview to create one.

The court further held that the business court properly declined to use its “blue pencil” power to write a geographic limitation into the agreement. The Restrictive Covenants Act allows a court to modify a covenant that is otherwise void and unenforceable so long as the modification does not render the covenant more restrictive with regard to the employee. The business court found, and the court of appeals agreed, that to exercise that authority in this case would require adding a material term rather than simply narrowing or severing impermissible language or terms.

The effect of the ruling is that in Georgia, there must be an express geographic restriction for a covenant against solicitation of a former employer’s employees to be enforceable. The court said that geographic restrictions will be read leniently but that some descriptive language is required. If you have ended an employment contract containing such a covenant, an attorney experienced in non-compete and non-solicitation agreements can advise you about your current obligations.

Attorney K.P. Reddy at The Reddy Law Firm, P.C. has extensive experience negotiating and litigating employment contracts for employees and businesses in Atlanta, Suwanee, Marietta, Gainesville and Johns Creek and across Georgia. If you are a party to an employment contract or are contemplating entering one, call 678-629-3246 or contact us online to arrange a consultation.

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