Atlanta Business Attorney Discusses Non-Competition and Non-Solicitation Agreements
Competition and the free market are the backbones of American capitalism. Thus, many people who work in a particular business field and develop a valuable skillset and a loyal customer or client base over time often decide they could advance their careers more by leaving their current employer and putting their skills and experience to work for themselves or for a competing business, but can an Atlanta business lawyer help? This happens in a variety of fields from advertising and accounting to entertainment, manufacturing, maintenance, and retail just to name a few.
However, employers who have invested a lot of time and money to train employees in their particular field and have provided them the benefit of their company name and access to the company’s existing pool of customers or clients are understandably concerned about the ability of their employees to leave the business, take their loyal clients with them, and begin directly competing with their company. They are also concerned about the ability of competitors to lure away successful employees and the customers or clients who are loyal to that employee, which could cause a business a huge loss with little or no notice.
To address these concerns, employers often include clauses in employment contracts which prevent their employees from competing with them or trying to take customers or clients with them or solicit the employer’s clients later. These contractual provisions, if enforced by a court, would restrict the freedom of an individual to work in the field and with the customers and clients of his choosing. So the question that arises is are contracts like this enforceable in Georgia?
Difference Between Non-Competition and Non-Solicitation Contracts
The answer is yes, but only if the clauses meet the strict criteria provided by Georgia law. Provisions in an employment contract which prevent an employee from competing with his current employer after leaving the company are called “Non-Competition Covenants” or, more commonly, Non-Compete agreements. Provisions which prevent an employee from taking any action to solicit or entice an existing customer or client to leave the company and begin doing business with the departing employee’s new company instead are called “Non-Solicitation Covenants.”
New Georgia Statute Governing These Contracts
Both Non-Compete and Non-Solicitation covenants restrain the freedom an American worker would otherwise have in our free market economy, so Georgia courts interpret them very strictly and only enforce them if they are narrowly tailored to protect the employer’s legitimate time and money investment in the employee without preventing the employee from doing any work anywhere within his particular field. For decades, the question of enforcement of these contracts was left solely to common law principles (i.e. discretion of the judge based on prior court decisions on the topic). Now, Georgia courts have the assistance of a new Georgia statute on the subject matter which creates a bright line test of when such contracts will definitely be enforceable and when the judge will have to weigh the evidence to determine enforcement.
Georgia courts require non-compete and non-solicitation agreements to pass a 4 part test before they will be enforced. The four components of the enforceability test require the restrictive covenants to be:
- Supported by consideration (some type of benefit of the bargain)
- Reasonably necessary to protect the employer’s interest
- Not unduly prejudicial to the public’s interest
It is up to a judge to decide whether or not a non-compete or non-solicitation agreement meets those four criteria and is legally enforceable or not. Employers drafting non-compete and non-solicitation agreements for their employees must be very careful because if the agreements are found to be too restrictive to pass the 4 part test, a court will not simply strike out the language that goes too far and enforce the rest. If any part of any restrictive covenant in the contract is unenforceable then all of the restrictive covenants in the contract will be held unenforceable.
Reasonableness A Big Factor In Outcome
To be reasonable, non-compete and non-solicitation agreements must be for only a limited period of time, must be limited in its geographical coverage, and must be limited in scope. For example, while a business could not legally prohibit its former employee from ever soliciting business from any of its existing customers, it could legally prohibit the employee from soliciting any of its existing customers which the employee had any contact with during his employment for a period of two years after the employment ends. Likewise, while an employer could not legally prohibit its employee from ever going to work for a competitor, it could under the right circumstances prohibit its employee from performing any of the same services they provided at the company within a 25 mile radius of the company’s office for two years after leaving the company. Given the right facts, Georgia courts have found those type of non-solicitation and non-compete agreements strike a fair balance between protecting the employer’s investment and providing the employee a fair opportunity to put their skills to work elsewhere in the free market.
If you are an employer wanting to draft an enforceable non-compete or non-solicitation agreement or an employee being asked to sign such an agreement, you should contact an experienced business or employment law attorney to discuss how to make sure your legal rights are protected before entering such an agreement.