For decades, Georgia law on employee restrictive covenants has been defined exclusively by the decisions of the Georgia Supreme Court and Court of Appeals, which historically have been hostile toward such covenants. Under the court-created common law, noncompete and customer nonsolicitation agreements are subject to a "strict scrutiny" standard, which consists of a maze of highly technical rules under which most covenants are vulnerable to enforceability challenges. As a component of the strict scrutiny standard, the Georgia courts adopted an "all-or-nothing" rule, under which an overbroad noncompete clause automatically invalidates both the noncompete covenant and any nonsolicitation covenant contained in the same agreement (and vice versa).

In November 2010, the Georgia electorate voted to amend the state's constitution so as to allow for legislation enhancing the enforceability of post-employment restrictive covenants. While the November 2010 vote gave immediate effect to a statute containing flexible enforceability standards for noncompete, nonsolicitation, and nondisclosure covenants, due to a drafting oversight, the enabling constitutional amendment itself did not become effective until January 1, 2011. The mismatched effective dates arguably rendered the statute unconstitutional and void, and this made relying on the statute an extremely risky proposition. Consequently, many Georgia employers never endeavored to take advantage of the benefits the statute was intended to provide.

In November, attorneys from Littler alerted key members of the Georgia General Assembly to the statute's apparent constitutional defect. We advised that the problem could effectively be resolved by reenacting a substantially identical version of the statute during the 2011 legislative session. And, the General Assembly has done just that. The "new" version of the statute was passed on April 14, 2011, and Georgia's Governor signed it into law on May 11, 2011. Like its first incarnation, the reenacted statute eschews the "strict scrutiny" standard in favor of more lenient and forgiving enforceability rules. The Statute also eliminates the draconian "all-or-nothing" rule and allows courts to modify covenants that are found to be overly broad. Importantly, however, the new version of the Act applies only to agreements that are entered into on or after May 11, 2011 (the Statute's effective date).

Continue reading at Littler’s ASAP: Georgia's Reenacted Restrictive Covenants Statute – A New Era in Georgia Noncompete Law Has Finally Arrived