Yates Perspectives:

The New Georgia Restrictive Covenants Act – PRACTICAL POINTERS

On November 2nd, Georgia voters will be electing a new Governor, Lieutenant Governor and other key officials – and, in effect, voting on approval of the Georgia Restrictive Covenants Act.  The Act will become law if a Georgia Constitutional Amendment is approved by the voters.

The likelihood of approval is high — the ballot language has been drafted in such a way that the legislature hopes that no law-abiding capitalist will vote against it.  It’s also been placed as one of the first Constitutional Amendments on the ballot.

If the Act is approved, it will accomplish the following:

• Significantly increase the likelihood that non-competition covenants in employment agreements and other contracts signed after the Act takes effect will be enforceable (the benefits of the Act only apply to agreements signed after the Act becomes effective)
• Eliminate many of the legal requirements that have befuddled lawyers for years in trying to draft valid restrictive covenants and non-competition clauses in Georgia
• Give Georgia courts the ability to “blue pencil” a restrictive covenant — meaning the court may line through restrictive covenants to make them enforceable.

For proponents, the wisdom of passing the Act is clear — the existing Georgia law on restrictive covenants has been a legal quagmire and has resulted in thousands of legal disputes, court cases and arbitrations.

For opponents, the expansiveness of the Act has been questioned as being detrimental to entrepreneurial mobility and innovation.

There are several practical pointers to be considered if the Act is adopted through approval of the Constitutional Amendment:

• Existing employment agreements will need to be reviewed to determine if they are enforceable under the pre-Act case law
• New covenant agreements will need to be formulated that conform with the safe harbors established in the Act with regard to the scope, duration, and coverage of restrictive covenants
• Departing employees will need to have their existing agreement reviewed to determine the expected court interpretation (under either the Act or the old law) that will be applied if their restrictive covenants are later reviewed by a Georgia court.

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For more information regarding the Georgia Restrictive Covenants Act, visit the MMM Tech Law & Business Report at http://www.www.mmmtechlaw.com/2010/08/12/georgia-restrictive-covenant-act-impact-on-tech-companies-and-entrepreneurs/.

This information is presented for educational purposes and is not intended to constitute legal advice; see disclaimer at http://www.www.mmmtechlaw.com/privacy-policy-and-disclaimer/. Contact John Yates for more information at jyates@mmmlaw.com; 404-504-5444.