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Georgia noncompete enforcement: Law could stifle new businesses

In 2011, Georgia lawmakers passed an amendment that gives businesses more power to enforce noncompete agreements. The Atlanta Business Chronicle states that the new law establishes a new technique the courts can use called “blue penciling.” Under the old law, the courts could essentially declare that the noncompete agreement between a business and an employee was not enforceable if just one provision was determined unfair.

The new law gives judges the ability to change just those portions which are deemed unreasonable instead of tossing the whole agreement. Judges can also evaluate the intent of the employer in drafting the portion under dispute, giving businesses the ability to establish stricter limitations on their employees. The new law, however, was only applicable to contracts drafted after it was signed but it was expected that businesses would draft new contracts for their employees.

However, while the new law gives current companies a bit more control over their employees, The Wall Street Journal says that enforcing noncompete agreements could harm the growth of industries and keep new businesses from starting. One study showed that states without strict enforcement of the noncompete showed more spinoffs forming, higher job growth and more startup companies.

In states where noncompetes are enforced, many people who are planning to go out on their own have to wait for the noncompete agreement to expire. It also makes it hard for new businesses to hire top talent since the applicants are often subject to a noncompete. Some people actually have to move to a new state in order to open a new business or join a startup. Noncompetes are being used on employees who are researchers, sales reps, innovation, top executives and engineers.

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