Employers: Using Restrictive Covenants to Help Protect Business Interests

If you are an employer, you may have questions about whether you can have your employees sign a covenant not to compete, or not to solicit your clients or other employees. One of your questions is almost certainly whether those types of agreements can be enforced in Georgia?

Some people believe a myth or urban legend that a covenant not to compete or a covenant not to solicit clients will not be enforced in Georgia, and that these clauses on contracts are meaningless. That’s simply not true.

In recent years, Georgia’s laws on these types of contracts have changed.And they have arguably become more favorable to an employer – at least with respect to certain classes of employees. Before the laws were changed in 2011, the courts interpreted these contracts pretty harshly.If ALL of the provisions were reasonable and valid, the court would enforce the contract. But, on the other hand, if any part of the restriction was overly broad under the law, then the whole agreement was essentially tossed out.

Now, effective in May 2011, Georgia courts have the ability to blue-pencil the agreement (for contracts signed on or after the effective date). This means that the court can modify the restrictive covenant to make it fit within the bounds of the law, and it can then enforce that modified covenant. As a result, these covenants not to compete, not to solicit, or not to disclose certain confidential information can certainly be enforced. And these can be good tools to use to help a business protect its interests. Understand, though, that just because a court can blue-pencil the contract, that does not mean that it will. So, the business wants to make sure it has carefully drafted the contracts to make them more likely to be enforced.

As an employer, there are many reasons why it may make sense to have employees sign a covenant not to compete or not to solicit clients or other employees. The business’s data, client lists, trade secrets and confidential information also need to be protected. And, of course, the business’s relationships with its clients, and with its other employees, is critical to protect as well. Carefully written covenants not to compete and not to solicit, as well as ones not to disclose confidential information, can be an effective and worthwhile tool for an employer to use.

If you need guidance about how to effectively utilize restrictive covenants to help protect your business, I invite you to give us a call to chat and discuss whether these types of agreements would be beneficial to your business.