Saturday, May 8, 2010

Georgia Non-Compete Reform Up To Voters In November

It seems like non-compete reform in Georgia has been a slow marathon, but the finish line appears to be in sight.

As readers of this blog probably have found out, Georgia is one of those employee-friendly states where non-compete agreements are enforced much less frequently than in other jurisdictions. The reason largely has to do with Georgia's strict blue-pencil rule, which ends up invalidating a good percentage of contracts on technicalities. Even the slightest degree of overbreadth can render the entire agreement void and unenforceable.

The Georgia legislature has approved a constitutional amendment that will change non-compete law should voters ratify it in November. A simple majority is required for the constitutional amendment to take effect, which then will make non-competes easier to enforce and yield a lot less handwringing by attorneys who draft them.

There are a number of revisions that will go into effect if the amendment passes, including a grant of authority to Georgia courts to blue-pencil covenants. In addition, non-solicitation clauses can include a prohibition on acceptance of business from clients. This would overturn a line of Georgia cases that ruled such a restraint on so-called "passive" solicitation is overbroad and void against public policy. The law also sets presumptively reasonable non-compete durations: for employment, 2 years; for franchisee or distributors, 3 years; and for a seller of a business, the longer of 5 years or the time during which payments are made for the sale.

Finally, the law only applies to new agreements entered into after the effective date. Agreements existing before the effective date of the law would be examined under the old law. Georgia business attorneys should gain a nice stable of employment contract drafting work over the next year or so, assuming this constitutional amendment passes.

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