Prior to May 11, 2011, the law in Georgia tended to favor former employees of a business when a dispute arose about the enforceability of restrictive covenants such as covenants not to compete, covenants for non-solicitation, etc. If one of the agreements subject to strict scrutiny by the courts was unreasonable, then the entire agreement was void, and the courts could not modify the agreements to make them lawful.
Later, a constitutional amendment in Georgia backed by business interests was passed, which became effective in May 2011. Now, under the Georgia Restrictive Covenants Act, restrictive covenants entered into after the effective date of the new law can be "blue-penciled" by the court to modify the agreement into something lawful and enforceable, if it is found that the original agreement is problematic under the law. The end result is that the court will look to enforce, as close as possible, the original intent of the agreement.
Older agreements that are unreasonable continue to be more problematic for employers. A case in point this month from the Georgia Court of Appeals demonstrates the predicament. In Vulcan Steel Structures, Inc. et. al. v. McCarty et. al., (Georgia Court of Appeals, A14A0803, October 6, 2014), the court affirmed the trial court's findings that the restrictive covenants were unenforceable. In that case, the employer had an employee (McCarty) sign a non-solicitation covenant that was to last for two years following the termination of the employment. The agreement prohibited McCarty from conducting business with former clients of the employer, even when such business was not solicited. The court stated, "We hold that the non-solicitation of customers covenant in the agreement is unenforceable because it prohibits McCarty from accepting business from unsolicited clients."
Had the employer re-executed the agreement following the effective date of the new act, the court could have blue-penciled the agreement if needed to bring it into compliance with Georgia law. But, because this agreement fell under the older law, the court could not modify it, and found that the agreement was simply not enforceable.
The calendar matters in cases involving restrictive covenants. If you want your covenants to be enforced - or at least have a greater chance of being enforced - then you may wish to have employees execute new agreements that are dated following the effective date of the new law. Before doing so, be sure to check with your company's lawyer to ensure that the agreement is drafted well and is proper. And, if you are an employee faced with signing an agreement, you should understand that restrictive covenants can be enforced in Georgia, and that violative language can be modified as appropriate by the courts to help enforce the agreement. As such, be sure that you fully understand any restrictive covenant before you sign it, and consult with a lawyer if needed.