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Roadblock to covenants not to compete could be choice of law

Many Georgia employers require both in-state and out-of-state employees to sign non-compete agreements. When it comes to out-of-state employees and covenants not to compete, many include a choice of law provision. However, just because a choice of law is included in a contract does not mean it will be upheld.

In general, a choice of law may be upheld if the company needs to have substantial ties in the state where the employee works and cannot be in violation of any public policy of the employee's home state. Some states do not allow non-compete agreements due to a belief that they inhibit free competition for both employees and employers. Restrictions such as these leave many Georgia companies wondering how to include and possibly enforce non-compete agreements for out-of-state employees.

An alternative could be the choice of forum. An employer may have to abide by the laws of the employee's home state, but it may be possible to choose a Georgia court in which to file a dispute if one arises. Such a provision may not necessarily be binding on the employee, but it could be enough of a deterrent to keep the employee from violating the agreement.

Employment contracts often include covenants not to compete as a safeguard for employers with a specific client base or line of products. Enforcing those agreements in other states could require some choices to be made prior to finalizing the agreement. It may be necessary to do some research to determine whether the employee's home state will respect a choice of Georgia law, or if a choice of forum would be a better option. This may require some advice and assistance in drafting and executing such an agreement.

Source: hr.blr.com, Pitfalls of choice of law clauses in employment contracts, Holly Jones, Feb. 4, 2014

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