Until recently, Georgia was one of the most difficult states in which to enforce a non-compete or other restrictive covenant agreement against employees who left their jobs, set up their own business or went to work for a competitor. In 2009, the Georgia Legislature decide to change this by enacting legislation intended to clarify the law on non-compete agreements as well as other restrictive covenants (such as non-solicitation and non-disclosure provisions).
While the goal was clear, the legislation was not. The law that was enacted (and the amendment to the Georgia Constitution that was needed to permit the new legislation) left confusion about when the new law would take effect. Knowing the effective date was obviously important, since employers drafting new covenants with existing or new employees needed to know what law would be used to interpret them if a dispute arose — the new statute or the old, existing case law (which was often very confusing and very difficult for employers). Now, with a recently issued court decision, we finally have some clarification about when the new law took effect.
As you can read about in more detail in this Advisory issued today by our law firm’s Labor & Employment group, the federal court of appeals that covers Georgia has ruled that the effective date of the new law is May 11, 2011. So, any covenant entered into with an employee before May 11, 2011 will be subject to the old case law in Georgia, while any covenant entered into on or after May 11, 2011 will be subject to the new statute.
This decision is important to employers for a number of reasons. First, the new law was intended to provide clarity — knowing when it became effective is necessary for that clarity.
Second, many employers entered into covenants in late 2010 or the first few months of 2011 — after the original statute and the following constitutional amendment had passed — believing that the new law would apply to those agreements. This ruling by the federal appellate court means that the new statute does not apply to agreements signed in that window (November 3, 2010 through May 10, 2011). Employers who want the benefit of the new law need to have new agreements signed if their agreement was signed any time before May 11, 2011.
Finally, this court decision is a good reminder for employers to revisit existing non-compete and other restrictive covenant agreements to make sure they are lawful, enforceable, and will accomplish what the employer wanted in signing the agreement. If you are an HR professional in Georgia or if you deal with employees in Georgia, this court ruling and the Georgia statute on restrictive covenants (O.C.G.A. Section 13-8-50 et. seq.) — now with a clear effective date — are worth a few focused minutes of your time.