The Georgia Court of Appeals recently provided important clarification of the requirements for nonsolicitation agreements under Georgia’s 2011 Restrictive Covenants Act.
In North American Senior Benefits v. Wimmer, the court held that an employee nonsolicitation provision must contain an express geographic limitation to be enforceable. The decision also explained that while courts have some discretion to narrow or sever restrictive covenants to bring them into compliance with Georgia law, a court may not add a geographical limitation to a document lacking that material term.
Georgia’s Restrictive Covenants Act requires that restrictive covenants be “reasonable in time, geographic area and scope of prohibited activities.” Some trial courts in Georgia had already found that this language requires an express geographic restriction in employee nonsolicitation provisions, but until now, no Georgia appeals court had addressed the issue.
In the Wimmer case, the plaintiff, an insurance marketing company, sued two former independent agents for violation of their agent contracts. Those contracts contained a nonsolicitation provision that for two years after their termination prohibited the agents from soliciting any employee, agent, or independent contractor of the company. The plaintiff claimed the agents had violated this covenant by poaching its employees.
In 2022, Judge Walter W. Davis of the Georgia State-wide Business Court refused to enforce the post-employment nonsolicitation provision, finding it unenforceable under Georgia’s Restrictive Covenants Act because it contained no geographic limitation. Davis also declined to bring the covenant into compliance with the Georgia’s Restrictive Covenant Act. To do so, Davis opined, “would materially alter the restriction in a way that goes beyond simply narrowing or severing impermissible language or terms.” The court dismissed the plaintiff’s claims related to the agents’ alleged breach of the nonsolicitation provision.
The plaintiff appealed, arguing that the Business Court should have altered the provision. On June 13, the Georgia Court of Appeals, by split decision, affirmed Davis’s ruling. The Georgia Court of Appeals agreed that Georgia’s Restrictive Covenants Act does require that nonsolicitation provisions contain an express territorial limit, and that a court may not write in that material term. While the geographic component is to be “read forgivingly,” the court noted, it must be present. Without any geographic restriction, the court held, a nonsolicitation provision is altogether void and unenforceable.
What Does This Mean for Employers?
While it is possible that the Georgia Supreme Court could overrule Wimmer or that another appellate panel could render a contrary decision, the safe course at this juncture for employers is to include a geographic limitation in nonsolicitation agreements governed by the Restrictive Covenants Act. Employers should also consider amending existing nonsolicitation provisions that lack a territorial limitation.
In the current labor market, employers increasingly feel the need to enforce such provisions. If Georgia courts will not modify nonsolicitation agreements where doing so would require adding the geographic term, a Georgia employer gains little from leaving such unenforceable provisions in place.
Georgia’s case law with respect to post-employment restrictive covenants is complex, and many areas are open to interpretation, or require further guidance.
Kathryn S. McConnell and Jacob Gibson are attorneys with Littler in Atlanta. ©2023. All rights reserved. Reprinted with permission.