Georgia’s New Restrictive Covenant Law: Third Time’s The Charm

By Sarah H. Lamar, published on June 29, 2011, in Business in Savannah.

Until recently, Georgia has been considered “unfriendly” to restrictive covenants as they related to employment. Such covenants include non-competition, non-solicitation and confidentiality agreements.

During the 2009 legislative session, the Georgia General Assembly passed House Bill 173 in an effort to broaden the reach of restrictive covenants and make them more enforceable in the state. The law was contingent upon the passage of a constitutional amendment.

The following year, as part of the 2010 legislative session, the General Assembly enacted HR 178, a resolution proposing a constitutional amendment necessary for HR 173 to become law. Last November, Georgia voters ratified the legislation in a statewide ballot. However, issues relating to the effective date of HB 173 raised questions about the validity and enforceability of the legislation.

Therefore, House Bill 30 was introduced for the 2011 legislative session to resolve any “gray areas” surrounding the previous restrictive covenant legislation. On May 11, 2011, Georgia Governor Nathan Deal signed House Bill 30. The new law, which benefits employers and other business interests, expands the enforceability of restrictive covenants and brings the Peach State more in line with similar non-compete legislation in other states.

Key provisions of the new law include providing for judicial modification or “blue penciling” of an otherwise overly broad covenant to make it enforceable; allowing the courts to evaluate non-solicitation covenants and non-compete covenants separately and to enforce one without regard to the other; and enhancing non-disclosure provisions by defining “confidential information” and eliminating the need for a time limit with regard to non-trade secret confidential information.

The law also defines key terms such as “confidential information,” “employee,” “legitimate business interest” and “material contact” and presumes reasonable non-compete time restrictions of up to two years following the termination of employment. The law also allows non-solicitation provisions to stand without reference to a specific geographic area.

Although most provisions of the new law are beneficial to employers, the legislation does place limitations on the types of employees who may be required to sign non-compete provisions. Before having employees sign new non-competes, employers should ensure that the employees fall within one of the specific definitions outlined in the statute, including “key” employees, professionals and certain managers and sales employees.

The new law applies to all covenants entered into on or after May 11, 2011. Companies should take note of this important new legislation in light of its expanded protection for employers.

When in doubt, consult an employment law attorney to review your company’s existing restrictive covenant agreements and determine compliance with the new law.
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Sarah Lamar is a partner at HunterMaclean focusing on employment law. She can be reached at 912.236.0261 or slamar@huntermaclean.com.