Client Alerts
August 09, 2023

Georgia Court of Appeals Holds that Non-Solicitation-of-Employees Restrictive Covenants Must Have Express Geographic Limitations

Stites & Harbison Client Alert, August 10, 2023

For the second time in five years a split panel of the Georgia Court of Appeals decided that a post-employment restrictive covenant without any geographic limitations is unenforceable except in limited circumstances. The bottom line for employers is that while post-employment restrictions on efforts to solicit a former employer’s customers or restrictions on using trade secrets do not require geographic limitations, all other post-employment restrictions do. Employers should err on the side of caution if they want their agreements to be enforceable or capable of being blue-penciled under Georgia law.

The prior case touching on this issue, Carpet Care Multiservices v. Carle, 347 Ga. App. 497 (2018), was only persuasive authority because there was a dissent and the decision was issued before August 1, 2020. The Court of Appeals adopted Carpet Care’s reasoning in N. Am. Senior Benefits, LLC v. Wimmer, No. A23A0162, 2023 WL 3963931 (Ga. Ct. App. June 13, 2023). Although there was also a dissent in Wimmer, the latest decision is binding precedent under the current rules for the Georgia Court of Appeals.

The questions in Wimmer were whether the following restrictive covenant was enforceable or capable of being blue-penciled:

Non-Solicitation of Employees and Independent Contractors: During the term of the Licensed Agent’s contract with NASB and for a period of two (2) years following termination of said contract, Licensed Agent shall not, directly or indirectly: (a) solicit for the provision [of] services or employment any employee , agent or independent contractor of NASB, (b) advise or recommend to any other person that they employ or solicit for provision of services any employee or independent contractor for NASB, (c) encourage or advise such employees, agents or independent contractors to sever, discontinue or not renew any agreement or relationship to NASB, or (d) otherwise establish or seek to establish any business relationship with any such employee, agent or independent contractor relating to the sale of insurance products.

The Georgia state-wide business court decided that the restrictive covenant was unenforceable because it did not have any geographic limitation, and did not implicate trade secrets or non-solicitation of customers. It also decided that it could not be blue-penciled to apply a geographic limit because there was no limitation in the original contract. The Court of Appeals affirmed, and refused to adopt the dissent’s reasoning that there was an implicit geographic limitation because the covenant was limited to specific people who all worked in a definable geographic area.

This may not be the end of the line. The Wimmer appellant has petitioned for certiorari to the Georgia Supreme Court. With two split opinions from the Court of Appeals in five years on the same statutory interpretation question, this could be one of the rare cases that piques the Georgia Supreme Court’s interest.

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