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What employers should know about non-competes

A company's viability and profitability is tied to its ability to compete in the marketplace. Non-competition agreements and restrictive covenants are designed to help employers keep their edge by protecting trade secrets, client lists and other non-tangible assets. They also hopefully discourage talented employees from leaving to work for a direct competitor.

However, both Georgia state laws and federal employment laws are highly sensitive to ensuring employees do not get taken advantage of. Therefore, when creating or enforcing non-compete agreements, businesses must tread carefully and work with experienced counsel.

The following provides general information on what to keep in mind when dealing with non-competes in Georgia.

A little history of non-compete law

Prior to 2010, Georgia's laws regarding non-competition agreements were quite strict. Employers had to narrowly define the parameters governing the time, geographic scope and activities of the agreement. Broad strokes could lead to effective challenges if the court found the terms unreasonable or unfair to the employee by being too vague or far-reaching.

Furthermore, Georgia was one of a few "No Blue Pencil" states. This meant that the contract had to be considered as a whole entity if challenged. "Blue pencil" refers to the act of modifying an existing agreement such that some parts are enforceable while others are not. As a "no blue pencil" state, Georgia courts could not allow certain parts of the agreement to stand while others fell. So, if an employee challenged one portion of the agreement and won, the whole agreement was considered null and void.

Pro-employer changes

In November 2010, the Georgia legislature passed laws affecting how companies approach the way non-competition agreements are enforced. These changes resulted in a number of positive outcomes for employers:

  • A reversal of the "No Blue Pencil Rule," meaning that if some portions of a contract are considered void, then the remaining relevant portions are still enforceable
  • Express reference to specific geographic areas are no longer required
  • Timeframes for enforcing a non-compete were clarified as two years or less from the termination date of the employee
  • General restrictions aimed at preventing conflicts of interest while an employee is still employed are not considered unreasonable

Make no mistake. Even with these changes, enforcing a non-compete agreement or restrictive covenant requires an experienced hand. If you have questions or need help enforcing your agreements, contact an attorney with proven experience handling employment cases in Georgia.

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