Wednesday, December 17, 2008

Georgia Court Rejects Employer's Attempt to Recoup Money Paid for Void Non-Compete (HRH Co. of Atlanta v. Holley)

A Georgia appellate court recently addressed a novel and unusual claim made by an employer who previously lost (both at trial and on appeal) a claim involving its non-compete agreement. In particular, an insurance brokerage, Hilb, Rogal & Hamilton (HRH) continued to pursue a claim against Hugh Holley for compensation paid to him when he signed a non-compete agreement in connection with the sale of his business to HRH.

Under his employment agreement with HRH, Holley was paid separate monetary consideration for his post-employment covenant not to compete with HRH. That consideration was listed separate from his regular salary and bonus. After HRH lost its breach of contract claim due to unenforceability of the covenant, HRH claimed it was entitled to that consideration back from Holley under the theory of unjust enrichment.

The court rejected HRH's claim, citing the general rule that if an "illegal contract be in part performed and money has been paid in pursuance of it, no action will lie to recover the money." The court, therefore, left the parties where they stood following HRH's payment to Holley for a non-compete that turned out to be void under Georgia law.

On a separate matter, the court affirmed a jury award for breach of fiduciary duty against Holley which required him to pay back the last two months of his salary. Mere employees have a duty not to compete actively with their employer or engage in steps that go beyond the preliminary stages of preparing to compete. Holley had taken steps to divert a potential client during the course of his HRH employment, and the salary forfeiture award was justified under Georgia law.


Court: Court of Appeals of Georgia, Third Division
Opinion Date: 12/2/08
Cite: Hilb, Rogal & Hamilton Co. of Atlanta, Inc. v. Holley, 670 S.E.2d 874 (Ga. Ct. App. 2008)
Favors: Employee
Law: Georgia

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