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How Georgia Regulates Restrictive Covenants in Employment

In 2011, Georgia adopted landmark legislation governing the use of restrictive covenants in employment contracts. It expressly permits noncompete, nonsolicit and nondisclosure agreements and sets presumptively reasonable scopes and time limits for enforceability. This statute represents a broad reform of state law, but not all employment situations are covered.

The Georgia Restrictive Covenants Act (GRCA) applies only to the following types of employees:

  • Executives, defined as people involved in high-level decision-making and management
  • Research and development personnel or other employees with confidential information
  • Employees with specialized skills, learning or abilities or employees possessing customer contacts or confidential information acquired by reason of having worked for the company
  • Franchisees, distributors, lessees, licensees or parties to partnership agreements, along with sales agents, brokers, or representatives involved in related agreements

The GRCA regulates these types of covenants:

  1. Noncompete Covenants — An employer can restrict an employee from competition as long as the restriction is reasonable in terms of time, geographic area and scope of prohibited activity. However, such a covenant is valid only against employees who meet at least one of these criteria:
    1. They customarily and regularly solicit customers or prospects.
    2. They customarily and regularly engage in making sales.
    3. They have a primary duty of managing the enterprise or a department or subdivision, have supervisory authority over two or more other employees and have authority to make or influence decisions about hiring, firing or changing the status of employees.
    4. They perform the duties of a “key employee” or of a “professional.” These terms are specifically defined.
  2. Nonsolicit Covenants — An employment agreement may contain a general prohibition of soliciting or attempting to solicit business from customers or prospective customers. However, this is presumptively limited to people with whom the employee had material contact and to products or services competitive with those of the employer. The covenant need not include a reference to a geographic area or to types of products or services considered to be competitive.
  3. Nondisclosure Covenants — The GRCA expressly permits nondisclosure agreements (NDAs) protecting confidential information (excluding trade secrets, which are covered under a separate Georgia statute). These NDAs can remain in effect for as long as the information is considered confidential, whereas previous case law had required a definitive time limit.

A powerful feature of the GRCA is its “blue pencil” provision. Enforcing restrictive covenants in employment contracts prior to 2011 was difficult in Georgia, as courts would typically void covenants in their entirety if even one aspect of the agreement was deemed too broad. The GRCA allows a court to edit or rewrite a covenant to narrow its scope and reach, thus making it enforceable.

The Reddy Law Firm, P.C. in Alpharetta has years of experience in drafting, negotiating, enforcing and litigating employment contracts for Georgia clients. Please call 678-629-3246 or contact us online for a free initial consultation.

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