Georgia: Restrictive Covenants Act Does Not Require Express Geographic Restriction
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APPLIES TO All Employers with Employees in GA |
EFFECTIVE September 4, 2024 |
QUESTIONS? Contact HR On-Call |
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Discussion:
In North American Senior Benefits, LLC v. Wimmer, the Georgia Supreme Court reversed a Georgia Court of Appeals’ ruling to state that the Georgia Covenants Act (GRCA) does not require restrictive covenants to contain an express geographic restriction. However, noncompetition and non-solicitation covenants governed by Section 13-8-53(a) of the GRCA must be reasonable in geographic scope. Here, the plaintiff corporation sought to enforce a non-solicitation covenant against two former employees. The covenant restricted the employees from hiring or otherwise interfering with the ongoing employment relationship of any of the company’s employees for two years after termination of their employment relationship. The non-solicitation covenant did not contain an express description of the geographic area in which the provision applied. The defendants sought to void agreement on this basis. The court disagreed.
In reaching its ruling, the court looked to the first sentence of Section 13-8-53(a), which provides that “enforcement of contracts that restrict competition during the term of a restrictive covenant, so long as such restrictions are reasonable in time, geographic area, and scope of prohibited activities, shall be permitted.” The court found that this construction did not mandate that a restrictive covenant contain an explicit geographic area, nor does it prohibit the geographic restriction from being implied. Specifically, Section 13-8-53(c) says that a description of a restrictive covenant’s geographic area is not always required. Section 13-8-56(2) provides the following examples of descriptions of the geographic scope of a restrictive covenant: (1) it “includes the areas in which the employer does business at any time during the parties’ relationship;” and (2) it “contains a list of particular competitors as prohibited employers for a limited period of time.”
It is also important to note that the court stressed that what is reasonable as a description of a geographic area under the GRCA is fact-specific, so it should be interpreted within the context of each individual case. This ruling reinforces that restrictive covenants can be subject to differing interpretations by the courts and should always be reviewed and drafted by legal counsel.
Action Items
- Review restrictive covenants with legal counsel.
Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2024 ManagEase