Erika Birg, Michael Elkon and Erin McPhail Wetty Published in Georgia Bar Journal
“Georgia Gets Competitive”

Erika Birg, Michael Elkon and Erin McPhail Wetty’s article, “Georgia Gets Competitive,” was published in the December 2009 Georgia Bar Journal.  Their article discusses the rationale for the Georgia Legislature’s passage of HB 173 to govern the enforcement and interpretation of restrictive covenants in the commercial arena.

According to their article, there are currently no clear rules governing restrictive covenants which leaves employers and most practitioners in the dark as to what is permissible. At present, restrictive covenants cases rise and fall on common law rules that, upon closer examination, are often unusual and arbitrary. The authors explain that the new statute sets forth ground rules for restrictive covenants, including: addressing the classes of employees who can sign restrictive covenants, the types of agreements that are covered and, most significantly, the standards for evaluating such covenants. They also note that it empowers courts to modify covenants, so that employers can enforce provisions that protect their legitimate interests. Erika, Michael, and Erin point out that by its own terms, however, the law will not go into effect until Georgia’s voters ratify a proposed constitutional amendment in November 2010.

The authors note that the statute does not apply retroactively, so the existing law on restrictive covenants will remain relevant for agreements entered into prior to that date. The authors add that because HB 173 is intended to and does change the law to overcome certain judicially developed anomalies, however, many employers may wish to plan prospectively for the new law.